EX-99.(C)(7) 12 d07253exv99wxcyx7y.txt APPRAISAL OF REGENCY OAKS REGENCY OAKS 200 MALTESE CIRCLE FERN PARK, FLORIDA MARKET VALUE - FEE SIMPLE ESTATE AS OF DECEMBER 9, 2003 PREPARED FOR: APARTMENT INVESTMENT AND MANAGEMENT COMPANY (AIMCO) C/O LINER YANKELEVITZ SUNSHINE & REGENSTREIF LLP & LIEFF CABRASER HEIMANN & BERNSTEIN ON BEHALF OF NUANES, ET. AL. [AMERICAN APPRAISAL ASSOCIATES(R) LOGO]
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DECEMBER 22, 2003 Apartment Investment and Management Company ("AIMCO") c/o Mr. Steven A. Velkei, Esq. Liner Yankelevitz Sunshine & Regenstreif LLP 1100 Glendon Avenue, 14th Floor Los Angeles, California 90024-3503 Nuanes, et al.( "Plaintiffs ") c/o Ms. Joy Kruse Lieff Cabraser Heimann & Bernstein Embarcadero Center West 275 Battery Street, 30th Floor San Francisco, California 94111 RE: REGENCY OAKS 200 MALTESE CIRCLE FERN PARK, SEMINOLE COUNTY, FLORIDA In accordance with your authorization, we have completed the appraisal of the above-referenced property. This complete appraisal is intended to report our analysis and conclusions in a summary format. The subject property consists of an apartment project having 343 units with a total of 342,080 square feet of rentable area. The improvements were built in 1969. The improvements are situated on 20 acres. Overall, the improvements are in average condition. As of the date of this appraisal, the subject property is 92% occupied. It is our understanding the appraisal will be used by the clients to assist the San Mateo Superior Court in the settlement of litigation between the above mentioned clients. The appraisal is intended to conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") as promulgated by the Appraisal Standards Board of the Appraisal Foundation and the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. The appraisal is presented in a summary report, and the Departure Provision of USPAP has not been invoked in this appraisal. It is entirely inappropriate to use this value conclusion or the report for any purpose other than the one stated. AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 2 REGENCY OAKS, FERN PARK, FLORIDA The opinions expressed in this appraisal cover letter can only be completely understood by reading the narrative report, addenda, and other data, which is attached. The appraisal is subject to the attached general assumptions and limiting conditions and general service conditions. As a result of our investigation, it is our opinion that the fee simple market value of the subject, effective December 9, 2003 is: ($8,800,000) Respectfully submitted, AMERICAN APPRAISAL ASSOCIATES, INC. -s- Frank A. Fehribach ----------------------------- December 22, 2003 Frank A. Fehribach, MAI #053272 Managing Principal, Real Estate Group Texas State Certified General Real Estate Appraiser, TX-1323954-G Report By: Alice MacQueen Florida Certified General Real Estate Appraiser, #RZ0002202 AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3 REGENCY OAKS, FERN PARK, FLORIDA TABLE OF CONTENTS Cover Letter of Transmittal Table of Contents APPRAISAL DATA Executive Summary ......................................................... 4 Introduction .............................................................. 9 Area Analysis ............................................................. 11 Market Analysis ........................................................... 14 Site Analysis ............................................................. 15 Improvement Analysis ...................................................... 15 Highest and Best Use ...................................................... 16 VALUATION Valuation Procedure ....................................................... 17 Sales Comparison Approach ................................................. 19 Income Capitalization Approach ............................................ 25 Reconciliation and Conclusion ............................................. 35
ADDENDA Exhibit A - Photographs of Subject Property Exhibit B - Summary of Rent Comparables and Photograph of Comparables Exhibit C - Assumptions and Limiting Conditions Exhibit D - Certificate of Appraiser Exhibit E - Qualifications General Service Conditions AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 4 REGENCY OAKS, FERN PARK, FLORIDA EXECUTIVE SUMMARY PART ONE - PROPERTY DESCRIPTION PROPERTY NAME: Regency Oaks LOCATION: 200 Maltese Circle Fern Park, Florida INTENDED USE OF ASSIGNMENT: Court Settlement PURPOSE OF APPRAISAL: "As Is" Market Value of the Fee Simple Estate INTEREST APPRAISED: Fee simple estate DATE OF VALUE: December 9, 2003 DATE OF REPORT: December 22, 2003 PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS: SITE: Size: 20 acres, or 871,200 square feet Assessor Parcel No.: 20-21-30-300-001J-0000; 20-21-30-300-001K-0000 Floodplain: Community Panel No. 12117C 0140 E (April 17, 1995) Flood Zone X, an area outside the floodplain. Zoning: R-3 (Residential Multifamily) BUILDING: No. of Units: 343 Units Total NRA: 342,080 Square Feet Average Unit Size: 997 Square Feet Apartment Density: 17.2 units per acre Year Built: 1969 UNIT MIX AND MARKET RENT: GROSS RENTAL INCOME PROJECTION
Market Rent Square ---------------- Monthly Annual Unit Type Feet Per Unit Per SF Income Income ---------------------------------------------------------------- Studio 589 $480 $0.81 $ 15,360 $ 184,320 1Br/1Ba 719 $500 $0.70 $ 46,500 $ 558,000 2Br/1.5Ba 984 $620 $0.63 $ 69,440 $ 833,280 2Br/2Ba 1,061 $630 $0.59 $ 35,910 $ 430,920 2Br/2.5Ba 1,800 $930 $0.52 $ 23,250 $ 279,000 3Br/2Ba 1,320 $840 $0.64 $ 10,080 $ 120,960 3Br/2.5Ba 2,070 $950 $0.46 $ 11,400 $ 136,800 -------- ---------- Total $211,940 $2,543,280 ======== ==========
OCCUPANCY: 92% ECONOMIC LIFE: 45 Years AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5 REGENCY OAKS, FERN PARK, FLORIDA EFFECTIVE AGE: 25 Years REMAINING ECONOMIC LIFE: 20 Years SUBJECT PHOTOGRAPHS AND LOCATION MAP: SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] APARTMENT BUILDING - FRONT VIEW APARTMENT BUILDING - SIDE VIEW AREA MAP [MAP] AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6 REGENCY OAKS, FERN PARK, FLORIDA NEIGHBORHOOD MAP [MAP] HIGHEST AND BEST USE: As Vacant: Hold for future multi-family development As Improved: Continuation as its current use METHOD OF VALUATION: In this instance, the Sales Comparison and Income Approaches to value were utilized. AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 7 REGENCY OAKS, FERN PARK, FLORIDA PART TWO - ECONOMIC INDICATORS INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION Amount $/Unit --------------------- ------ ------ Potential Rental Income $2,543,280 $7,415 Effective Gross Income $2,380,470 $6,940 Operating Expenses $1,338,491 $3,902 56.2% of EGI Net Operating Income: $ 870,478 $2,538 Capitalization Rate 9.75% DIRECT CAPITALIZATION VALUE $8,900,000 * $25,948 / UNIT DISCOUNTED CASH FLOW ANALYSIS: Holding Period 10 years 2002 Economic Vacancy 23% Stabilized Vacancy & Collection Loss: 18% Lease-up / Stabilization Period N/A Terminal Capitalization Rate 10.25% Discount Rate 12.00% Selling Costs 2.00% Growth Rates: Income 2.50% Expenses: 3.00% DISCOUNTED CASH FLOW VALUE $8,700,000 * $25,364 / UNIT RECONCILED INCOME CAPITALIZATION VALUE $8,800,000 $25,656 / UNIT
SALES COMPARISON APPROACH PRICE PER UNIT: Range of Sales $/Unit (Unadjusted) $34,797 to $43,000 Range of Sales $/Unit (Adjusted) $26,268 to $29,861 VALUE INDICATION - PRICE PER UNIT $9,600,000 * $27,988 / UNIT EGIM ANALYSIS Range of EGIMs from Improved Sales 5.30 to 5.84 Selected EGIM for Subject 4.00 Subject's Projected EGI $2,380,470 EGIM ANALYSIS CONCLUSION $9,500,000 * $27,697 / UNIT NOI PER UNIT ANALYSIS CONCLUSION $8,900,000 * $25,948 / UNIT RECONCILED SALES COMPARISON VALUE $9,200,000 $26,822 / UNIT
----------------- * Value indications are after adjustments for concessions, deferred maintenance, excess land and lease-up costs, if any. AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 8 REGENCY OAKS, FERN PARK, FLORIDA PART THREE - SUMMARY OF VALUE CONCLUSIONS SALES COMPARISON APPROACH: Price Per Unit $9,600,000 NOI Per Unit $8,900,000 EGIM Multiplier $9,500,000 INDICATED VALUE BY SALES COMPARISON $9,200,000 $26,822 / UNIT INCOME APPROACH: Direct Capitalization Method: $8,900,000 Discounted Cash Flow Method: $8,700,000 INDICATED VALUE BY THE INCOME APPROACH $8,800,000 $25,656 / UNIT RECONCILED OVERALL VALUE CONCLUSION: $8,800,000 $25,656 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9 REGENCY OAKS, FERN PARK, FLORIDA INTRODUCTION IDENTIFICATION OF THE SUBJECT The subject property is located at 200 Maltese Circle, Fern Park, Seminole County, Florida. Fern Park identifies it as 20-21-30-300-001J-0000; 20-21-30-300-001K-0000. SCOPE OF THE ASSIGNMENT The property, neighborhood, and comparables were inspected by Alice MacQueen on December 9, 2003. Alice MacQueen made a personal inspection of the subject property, performed the research, valuation analysis and wrote the report. Frank A. Fehribach, MAI reviewed the report and concurs with the value. Alice MacQueen has extensive experience in appraising similar properties and meets the USPAP competency provision. The scope of this investigation comprises the inspection of the property and the collection, verification, and analysis of general and specific data pertinent to the subject property. We have researched current improved sales and leases of similar properties, analyzing them as to their comparability, and adjusting them accordingly. We completed the Sales Comparison and Income Capitalization Approaches to value. From these approaches to value, a concluded overall value was made. DATE OF VALUE AND REPORT This appraisal was made to express the opinion of value as of December 9, 2003. The date of the report is December 22, 2003. PURPOSE AND USE OF APPRAISAL The purpose of the appraisal is to estimate the market value of the fee simple interest in the subject property. It is understood that the appraisal is intended to assist the clients in litigation settlement proceedings. The appraisal was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. PROPERTY RIGHTS APPRAISED We have appraised the Fee Simple Estate in the subject property (as applied in the Sales & Income Approaches), subject to the existing short-term leases. A Fee Simple Estate is defined in The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10 REGENCY OAKS, FERN PARK, FLORIDA 1993), as: "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat." MARKETING/EXPOSURE PERIOD MARKETING PERIOD: 6 to 12 months EXPOSURE PERIOD: 6 to 12 months HISTORY OF THE PROPERTY Ownership in the subject property is currently vested in Consolidated Capital Equity. To the best of our knowledge, no transfers of ownership or offers to purchase the subject are known to have occurred during the past three years. AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 11 REGENCY OAKS, FERN PARK, FLORIDA AREA/NEIGHBORHOOD ANALYSIS NEIGHBORHOOD ANALYSIS A neighborhood is a group of complementary land uses. The function of the neighborhood analysis is to describe the immediate surrounding environs. The subject is located in the city of Fern Park, Florida. Overall, the neighborhood is characterized as a suburban setting with the predominant land use being institutional. The subject's neighborhood is generally defined by the following boundaries. NEIGHBORHOOD BOUNDARIES East - Highway 417 West - Interstate 4 South - East-West Expressway North - Red Bug Lake Road MAJOR EMPLOYERS Major employers in the subject's area include The Walt Disney World Company Universal Orlando, Florida Hospital and Orlando Regional Healthcare, Lockheed Martin, Central Florida Investments and the University of Central Florida. The overall economic outlook for the area is considered favorable. DEMOGRAPHICS We have reviewed demographic data within the neighborhood. The following table summarizes the key data points. AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 12 REGENCY OAKS, FERN PARK, FLORIDA NEIGHBORHOOD DEMOGRAPHICS
AREA ------------------------------------------ CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA --------------------------------------------------------------------------------------- POPULATION TRENDS Current Population 24,426 121,187 230,503 1,721,904 5-Year Population 26,001 129,066 245,725 1,921,950 % Change CY-5Y 6.4% 6.5% 6.6% 11.6% Annual Change CY-5Y 1.3% 1.3% 1.3% 2.3% HOUSEHOLDS Current Households 10,125 48,206 94,791 655,258 5-Year Projected Households 10,754 51,041 100,505 731,362 % Change CY - 5Y 6.2% 5.9% 6.0% 11.6% Annual Change CY-5Y 1.2% 1.2% 1.2% 2.3% INCOME TRENDS Median Household Income $ 32,016 $ 35,441 $ 37,406 $ 40,114 Per Capita Income $ 17,041 $ 18,768 $ 21,478 $ 21,799 Average Household Income $ 41,464 $ 47,148 $ 52,290 $ 57,283
Source: Demographics Now The subject neighborhood's population is expected to show increases below that of the region. The immediate market offers inferior income levels as compared to the broader market. The following table illustrates the housing statistics in the subject's immediate area, as well as the MSA region. HOUSING TRENDS
AREA ------------------------------------------ CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA -------------------------------------------------------------------------------- HOUSING TRENDS % of Households Renting 48.44% 39.16% 39.13% 30.55% 5-Year Projected % Renting 47.20% 38.67% 38.65% 30.11% % of Households Owning 39.21% 52.00% 53.05% 60.90% 5-Year Projected % Owning 40.51% 52.59% 53.74% 61.87%
Source: Demographics Now AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13 REGENCY OAKS, FERN PARK, FLORIDA SURROUNDING IMPROVEMENTS The following uses surround the subject property: North - Retail/Commercial South - Single/Multifamily East - Bowling Alley and retail uses West - Single/multifamily development CONCLUSIONS The subject is well located within the city of Fern Park. The neighborhood is characterized as being mostly suburban in nature and is currently in the stable stage of development. The economic outlook for the neighborhood is judged to be favorable with a good economic base. AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 14 REGENCY OAKS, FERN PARK, FLORIDA MARKET ANALYSIS The subject property is located in the city of Fern Park in Seminole County. The overall pace of development in the subject's market is more or less stable. Recent construction in this submarket includes 220 units completed at Centergate at Baldwin Park near downtown Orlando. The following table illustrates historical vacancy rates for the subject's market. HISTORICAL VACANCY RATE
Period Region Submarket ------------------------- Aug-01 5.8% 5.0% Feb-02 9.2% 6.5% Aug-02 8.3% 6.2% Feb-03 9.5% 8.4% Aug-03 7.8% 6.7%
Source: Apartment Index Report, August 2003, by Carolinas Real Data Occupancy trends in the subject's market are increasing. Historically speaking, the subject's submarket has outperformed the overall market. Market rents in the subject's market have been following an increasing trend. The following table illustrates historical rental rates for the subject's market. HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change ------ ------ -------- --------- -------- Aug-01 $729 - $725 - Feb-02 $737 1.1% $746 2.9% Aug-02 $745 1.1% $732 -1.9% Feb-03 $749 0.5% $739 1.0% Aug-03 $775 3.5% $747 1.1%
Source: Apartment Index Report, August 2003, by Carolinas Real Data The following table illustrates a summary of the subject's competitive set. COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject -------------------------------------------------------------------------------------- R-1 Howel Branch Station 366 86% 1969 Same neighborhood R-2 Sandpiper 196 90% 1974 Same neighborhood R-3 Semoran North 348 N/A 1964 Same neighborhood R-4 Empiriam (Former Emerald Bay) 432 N/A 1972 Same neighborhood R-5 Birchwood Landing 184 N/A 1975 Same neighborhood Subject Regency Oaks 343 92% 1969
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 15 REGENCY OAKS, FERN PARK, FLORIDA PROPERTY DESCRIPTION SITE ANALYSIS Site Area 20 acres, or 871,200 square feet Shape Irregular Topography Level Utilities All necessary utilities are available to the site. Soil Conditions Stable Easements Affecting Site None other than typical utility easements Overall Site Appeal Average Flood Zone: Community Panel 12117C 0140 E, dated April 17, 1995 Flood Zone Zone X Zoning R-3, the subject improvements represent a legal conforming use of the site. REAL ESTATE TAXES
ASSESSED VALUE - 2003 ---------------------------------- TAX RATE / PROPERTY PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES -------------------------------------------------------------------------- 20-21-30-300- 001J-0000; 20- $1,742,400 $7,151,040 $8,893,440 0.01714 $152,470 21-30-300-001K- 0000
IMPROVEMENT ANALYSIS Year Built 1969 Number of Units 343 Net Rentable Area 342,080 Square Feet Construction: Foundation Reinforced concrete slab Frame Heavy or light wood Exterior Walls Wood or vinyl siding Roof Composition shingle over a wood truss structure Project Amenities Amenities at the subject include a swimming pool, tennis court, basketball court, picnic area, car wash, barbeque equipment, meeting hall, laundry room, business office, freshwater lake, and parking area. Unit Amenities Individual unit amenities include a balcony, and washer AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16 REGENCY OAKS, FERN PARK, FLORIDA dryer connection. Appliances available in each unit include a refrigerator, stove, dishwasher, water heater, garbage disposal, and oven. Unit Mix:
Unit Area Unit Type Number of Units (Sq. Ft.) ------------------------------------- Studio 32 589 1Br/1Ba 93 719 2Br/1.5Ba 112 984 2Br/2Ba 57 1,061 2Br/2.5Ba 25 1,800 3Br/2Ba 12 1,320 3Br/2.5Ba 12 2,070
Overall Condition Average Effective Age 25 years Economic Life 45 years Remaining Economic Life 20 years Deferred Maintenance None HIGHEST AND BEST USE ANALYSIS In accordance with the definition of highest and best use, an analysis of the site relating to its legal uses, physical possibilities, and financial feasibility is appropriate. The highest and best use as vacant is to hold for future multi-family development. The subject improvements were constructed in 1969 and consist of a 343-unit multifamily project. The highest and best use as improved is for a continued multifamily use. Overall, the highest and best use of the subject property is the continued use of the existing apartment project. AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 17 REGENCY OAKS, FERN PARK, FLORIDA THE VALUATION PROCEDURE There are three traditional approaches, which can be employed in establishing the market value of the subject property. These approaches and their applicability to the valuation of the subject are summarized as follows: THE COST APPROACH The application of the Cost Approach is based on the principle of substitution. This principle may be stated as follows: no one is justified in paying more for a property than that amount by which he or she can obtain, by purchase of a site and construction of a building, without undue delay, a property of equal desirability and utility. In the case of a new building, no deficiencies in the building should exist. In the case of income-producing real estate, the cost of construction plays a minor and relatively insignificant role in determining market value. The Cost Approach is typically only a reliable indicator of value for: (a) new properties; (b) special use properties; and (c) where the cost of reproducing the improvements is easily and accurately quantified and there is no economic obsolescence. In all instances, the issue of an appropriate entrepreneurial profit - the reward for undertaking the risk of construction, remains a highly subjective factor especially in a market lacking significant speculative development. THE SALES COMPARISON APPROACH The Sales Comparison Approach is an estimate of value based upon a process of comparing recent sales of similar properties in the surrounding or competing areas to the subject property. Inherent in this approach is the principle of substitution. The application of this approach consists of comparing the subject property with similar properties of the same general type which have been sold recently or currently are available for sale in competing areas. This comparative process involves judgment as to the similarity of the subject property and the comparable sale with respect to many value factors such as location, contract rent levels, quality of construction, reputation and prestige, age and condition, among others. The estimated value through this approach represents the probable price at which a willing seller would sell the subject property to a willing and knowledgeable buyer as of the date of value. AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 18 REGENCY OAKS, FERN PARK, FLORIDA THE INCOME CAPITALIZATION APPROACH The theory of the Income Capitalization Approach is based on the premise that present value is the value of the cash flow and reversionary value the property will produce over a reasonable holding (ownership) period. The Discounted Cash Flow Analysis will convert equity cash flows (including cash flows and equity reversion) into a present value utilizing an internal rate of return (or discount rate). The Internal Rate of Return (IRR) will be derived from a comparison of alternate investments, a comparative analysis of IRR's used by recent buyers of similar properties, and a review of published industry surveys. The Direct Capitalization Analysis converts one year of income into an overall value using overall capitalization rates from similar sales. The overall rates take into consideration buyers assumptions of the market over the long-term. The results of the Income Capitalization Analysis are usually the primary value indicator for income producing properties. Investors expect a reasonable rate of return on their equity investment based on the ownership risks involved; this approach closely parallels the investment decision process. RECONCILIATION In this instance, we have completed the Sales Comparison and Income Capitalization Approaches to value. As an income producing property, the income approach is a primary approach to value. The Sales Comparison Approach is also considered reliable as investors are buying similar buildings in the market. Our research indicates that market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, we have decided that the Cost Approach is not a reliable indicator of value for the subject, and this approach has not been utilized. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 19 REGENCY OAKS, FERN PARK, FLORIDA SALES COMPARISON APPROACH Use of market or comparable sales requires the collection and analysis of comparable sales data. Similar properties recently sold are compared to the subject and adjusted based on any perceived differences. This method is based on the premise that the costs of acquiring a substitute property would tend to establish a value for the subject property. The premise suggests that if a substitute is unavailable in the market, the reliability of the approach may be subordinate to the other approaches. The reliance on substitute properties produces shortcomings in the validity of this approach. Geographic and demographic characteristics from each submarket restrict which sales may be selected. Recent sales with a similar physical characteristics, income levels, and location are usually limited. The sales we have identified, however, do establish general valuation parameters as well as provide support to our conclusion derived through the income approach method. The standard unit of comparison among similar properties is the sales price per unit and price per square foot of net rentable area. To accurately adjust prices to satisfy the requirements of the sales comparison approach, numerous calculations and highly subjective judgments would be required including consideration of numerous income and expense details for which information may be unreliable or unknown. The sales price per unit and square foot are considered relevant to the investment decision, but primarily as a parameter against which value estimates derived through the income approach can be judged and compared. In examining the comparable sales, we have applied a subjective adjustment analysis, which includes specific adjustments derived from our experience and consulting with the market participants. SALES COMPARISON ANALYSIS Detailed on the following pages are sales transactions involving properties located in the subject's competitive investment market. Photographs of the sale transactions are located in the Addenda. Following the summary of sales is an adjustment grid that is used to arrive at a value. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 20 REGENCY OAKS, FERN PARK, FLORIDA SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 ------------------------------------------------------------------------------------------------------------------- Property Name Regency Oaks Empirian (formerly known as Sedgefield Apartments Emerald Bay) LOCATION: Address 200 Maltese Circle 5 Autumn Breeze Way 110 Sedgefield Circle City, State Fern Park, Florida Winter Park, FL Winter Park, FL County Seminole Seminole Seminole PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 342,080 427,680 98,346 Year Built 1969 1972 1973 Number of Units 343 432 111 Unit Mix: Type Total Type Total Type Total Studio 32 1Br/1BA 149 1Br/1BA 31 1Br/1Ba 93 2Br/2BA 132 2Br/2BA 75 2Br/1.5Ba 112 3Br/2BA 151 3Br/2BA 5 2Br/2Ba 57 2Br/2.5Ba 25 3Br/2Ba 12 3Br/2.5Ba 12 Average Unit Size (SF) 997 990 886 Land Area (Acre) 20.0000 23.0790 8.7000 Density (Units/Acre) 17.2 18.7 12.8 Parking Ratio (Spaces/Unit) 0.00 Adequate Adequate Parking Type (Gr., Cov., etc.) Garage, Open Covered Open + Carports Open CONDITION: Fair to Average Good Good APPEAL: Average Good Good AMENITIES: Pool/Spa Yes/No Yes/No Yes/No Gym Room No Yes Yes Laundry Room Yes Yes Yes Secured Parking No No No Sport Courts Yes No No Washer/Dryer Connection Some No No Other Other OCCUPANCY: 92% 94% 95% TRANSACTION DATA: Sale Date May, 2003 November, 2002 Sale Price ($) $17,200,000 $3,862,500 Grantor ERP Operating LP Sedgefield Associates Grantee Empirian Bay, LLC S&L Enterprises Ltd Sale Documentation Doc# 6912-3261 Doc# 4611-1975 Verification CoStar Realty CoStar Realty Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $3,541,190 $8,197 $8.28 $806,460 $7,265 $8.20 Vacancy/Credit Loss $ 354,119 $ 820 $0.83 $ 80,646 $ 727 $0.82 Effective Gross Income $3,187,071 $7,377 $7.45 $725,814 $6,539 $7.38 Operating Expenses $1,434,182 $3,320 $3.35 $355,200 $3,200 $3.61 Net Operating Income $1,752,889 $4,058 $4.10 $370,614 $3,339 $3.77 NOTES: Located just off Rt 436 in Located near the subject in subject's neighborhood. the same neighborhood. Units have been renovated All brick, good condition, and are superior to subject. overall superior to subject. PRICE PER UNIT $39,815 $34,797 PRICE PER SQUARE FOOT $ 40.22 $ 39.27 EXPENSE RATIO 45.0% 48.9% EGIM 5.40 5.32 OVERALL CAP RATE 10.19% 9.60% Cap Rate based on Pro Forma or Actual Income? PRO FORMA PRO FORMA COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 ----------------------------------------------------------------------------------------------------------------------------- Property Name La Aloma Courtyard at Winter Park The Ashley of Spring Valley LOCATION: Address 3040 Aloma Avenue 1695 Lee Road 693 S Wymore Road City, State Winter Park, FL Winter Park, FL Altamonte Springs, FL County Seminole Seminole Seminole PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 176,824 177,349 238,424 Year Built 1967 1966 1974 Number of Units 184 160 260 Unit Mix: Type Total Type Total Type Total 1Br/1BA 40 1Br/1BA 40 1Br/1BA 112 2Br/2BA 124 2Br/2BA 80 2Br/2BA 100 3Br/2BA 20 3Br/2BA 40 3Br/2BA 48 Average Unit Size (SF) 961 1,108 917 Land Area (Acre) 9.1000 9.5530 16.0000 Density (Units/Acre) 20.2 16.7 16.3 Parking Ratio (Spaces/Unit) Adequate Adequate Adequate Parking Type (Gr., Cov., etc.) Open Open Open CONDITION: Good Good Good APPEAL: Good Good Good AMENITIES: Pool/Spa Yes/No Yes/No Yes/No Gym Room Yes Yes Yes Laundry Room Yes Yes Yes Secured Parking No No No Sport Courts No No No Washer/Dryer Connection No No No Other Other OCCUPANCY: 95% 90% 95% TRANSACTION DATA: Sale Date September, 2002 May, 2001 August, 2001 Sale Price ($) $6,750,000 $6,100,000 $11,180,000 Grantor Veard-Winter Park Ltd Miles-Courtyard-WP LLC Gray Lumber Co, LP Grantee Florida Investment Properties, PRG/Winter Park LP Atlamonte Ashley LLC LLC Sale Documentation Doc# 6629-8177 Doc#6258-4812 Doc#4160-0027 Verification Carolinas Real Data Carolinas Real Data Carolinas Real Data Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $1,385,280 $7,529 $7.83 $1,286,400 $8,040 $7.25 $2,126,640 $8,179 $8.92 Vacancy/Credit Loss $ 207,792 $1,129 $1.18 $ 136,320 $ 852 $0.77 $ 212,664 $ 818 $0.89 Effective Gross Income $1,177,488 $6,399 $6.66 $1,150,080 $7,188 $6.48 $1,913,976 $7,361 $8.03 Operating Expenses $ 533,600 $2,900 $3.02 $ 480,000 $3,000 $2.71 $ 910,000 $3,500 $3.82 Net Operating Income $ 643,888 $3,499 $3.64 $ 670,080 $4,188 $3.78 $1,003,976 $3,861 $4.21 NOTES: Situated in same submarket Located in same submarket Located near the subject in but superior overall. Well- but with inferior location. the same neighborhood. maintained, superior curb Similar to superior condition Overall, superior to the appeal and condition. compared to the subject. subject property. PRICE PER UNIT $36,685 $38,125 $43,000 PRICE PER SQUARE FOOT $ 38.17 $ 34.40 $ 46.89 EXPENSE RATIO 45.3% 41.7% 47.5% EGIM 5.73 5.30 5.84 OVERALL CAP RATE 9.54% 10.98% 8.98% Cap Rate based on Pro Forma or Actual Income? PRO FORMA PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21 REGENCY OAKS, FERN PARK, FLORIDA IMPROVED SALES MAP [MAP] IMPROVED SALES ANALYSIS The improved sales indicate a sales price range from $34,797 to $43,000 per unit. Adjustments have been made to the sales to reflect differences in location, age/condition and quality/appeal. Generally speaking, larger properties typically have a lower price per unit when compared to smaller properties, all else being equal. Similarly, those projects with a higher average unit size will generally have a higher price per unit. After appropriate adjustments are made, the improved sales demonstrate an adjusted range for the subject from $26,268 to $29,861 per unit with a mean or average adjusted price of $28,195 per unit. The median adjusted price is $28,339 per unit. Based on the following analysis, we have concluded to a value of $28,000 per unit, which results in an "as is" value of $9,600,000 (rounded after necessary adjustment, if any). AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22 REGENCY OAKS, FERN PARK, FLORIDA SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 ------------------------------------------------------------------------------------------------------------------- Property Name Regency Oaks Empirian (formerly Sedgefield Apartments known as Emerald Bay) Address 200 Maltese Circle 5 Autumn Breeze Way 110 Sedgefield Circle City Fern Park, Florida Winter Park, FL Winter Park, FL Sale Date May, 2003 November, 2002 Sale Price ($) $17,200,000 $3,862,500 Net Rentable Area (SF) 342,080 427,680 98,346 Number of Units 343 432 111 Price Per Unit $39,815 $34,797 Year Built 1969 1972 1973 Land Area (Acre) 20.0000 23.0790 8.7000 VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Date of Sale (Time) 05-2003 0% 11-2002 3% VALUE AFTER TRANS. ADJUST. ($/UNIT) $39,815 $35,841 Location Superior -5% Superior -5% Number of Units 343 432 0% 111 -5% Quality / Appeal Average Superior -15% Superior -10% Age / Condition 1969 1972 / Good -5% 1973 / Good -5% Occupancy at Sale 92% 94% 0% 95% 0% Amenities Average Comparable 0% Comparable 0% Average Unit Size (SF) 997 990 0% 886 0% PHYSICAL ADJUSTMENT -25% -25% FINAL ADJUSTED VALUE ($/UNIT) $29,861 $26,881 COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 ------------------------------------------------------------------------------------------------------------------------------ Property Name La Aloma Courtyard at Winter Park The Ashley of Spring Valley Address 3040 Aloma Avenue 1695 Lee Road 693 S Wymore Road City Winter Park, FL Winter Park, FL Altamonte Springs, FL Sale Date September, 2002 May, 2001 August, 2001 Sale Price ($) $6,750,000 $6,100,000 $11,180,000 Net Rentable Area (SF) 176,824 177,349 238,424 Number of Units 184 160 260 Price Per Unit $36,685 $38,125 $43,000 Year Built 1967 1966 1974 Land Area (Acre) 9.1000 9.5530 16.0000 VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0% Date of Sale (Time) 09-2002 3% 05-2001 6% 08-2001 6% VALUE AFTER TRANS. ADJUST. ($/UNIT) $37,785 $40,413 $45,580 Location Superior -5% Superior -5% Superior -15% Number of Units 184 -5% 160 -5% 260 0% Quality / Appeal Superior -15% Superior -15% Superior -15% Age / Condition 1967 / Good 0% 1966 / Good 0% 1974 / Good -5% Occupancy at Sale 95% 0% 90% 0% 95% 0% Amenities Comparable 0% Comparable 0% Comparable 0% Average Unit Size (SF) 961 0% 1,108 -10% 917 0% PHYSICAL ADJUSTMENT -25% -35% -35% FINAL ADJUSTED VALUE ($/UNIT) $28,339 $26,268 $29,627
SUMMARY VALUE RANGE (PER UNIT) $26,268 TO $29,861 MEAN (PER UNIT) $28,195 MEDIAN (PER UNIT) $28,339 VALUE CONCLUSION (PER UNIT) $28,000
VALUE INDICATED BY SALES COMPARISON APPROACH $9,604,000 ROUNDED $9,600,000
NET OPERATING INCOME (NOI) ANALYSIS We have also conducted a net operating income (NOI) comparison analysis. The NOI effectively takes into account the various physical, location, and operating aspects of the sale. When the subject's NOI is compared to the sale NOI, a percent adjustment can be arrived at. The following table illustrates this analysis. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23 REGENCY OAKS, FERN PARK, FLORIDA NOI PER UNIT COMPARISON
SALE PRICE NOI/ SUBJECT NOI COMPARABLE NO. OF ---------- ---- ----------- ADJUSTMENT INDICATED NO. UNITS Price/unit OAR NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT ------------------------------------------------------------------------------------------------------------- I-1 432 $17,200,000 10.19% $1,752,889 $870,478 0.625 $24,902 $ 39,815 $ 4,058 $ 2,538 I-2 111 $ 3,862,500 9.60% $ 370,614 $870,478 0.760 $26,449 $ 34,797 $ 3,339 $ 2,538 I-3 184 $ 6,750,000 9.54% $ 643,888 $870,478 0.725 $26,605 $ 36,685 $ 3,499 $ 2,538 I-4 160 $ 6,100,000 10.98% $ 670,080 $870,478 0.606 $23,103 $ 38,125 $ 4,188 $ 2,538 I-5 260 $11,180,000 8.98% $1,003,976 $870,478 0.657 $28,261 $ 43,000 $ 3,861 $ 2,538
PRICE/UNIT
Low High Average Median $23,103 $28,261 $25,864 $26,449
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT Estimated Price Per Unit $ 26,000 Number of Units 343 ---------- Value Based on NOI Analysis $8,918,000 Rounded $8,900,000
The adjusted sales indicate a range of value between $23,103 and $28,261 per unit, with an average of $25,864 per unit. Based on the subject's competitive position within the improved sales, a value of $26,000 per unit is estimated. This indicates an "as is" market value of $8,900,000 (rounded after necessary adjustment, if any) for the NOI Per Unit Analysis. EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS The effective gross income multiplier (EGIM) is derived by dividing the sales price by the total effective gross income. The following table illustrates the EGIMs for the comparable improved sales. EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON
SALE PRICE COMPARABLE NO. OF ---------- EFFECTIVE OPERATING SUBJECT NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE OER PROJECTED OER EGIM -------------------------------------------------------------------------------------------------------------- I-1 432 $17,200,000 $3,187,071 $1,434,182 45.00% 5.40 $ 39,815 I-2 111 $ 3,862,500 $ 725,814 $ 355,200 48.94% 5.32 $ 34,797 I-3 184 $ 6,750,000 $1,177,488 $ 533,600 45.32% 56.23% 5.73 $ 36,685 I-4 160 $ 6,100,000 $1,150,080 $ 480,000 41.74% 5.30 $ 38,125 I-5 260 $11,180,000 $1,913,976 $ 910,000 47.55% 5.84 $ 43,000
EGIM
Low High Average Median 5.30 5.84 5.52 5.40
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES Estimate EGIM 4.00 Subject EGI $2,380,470 ---------- Value Based on EGIM Analysis $9,521,878 Rounded $9,500,000 Value Per Unit $ 27,697
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24 REGENCY OAKS, FERN PARK, FLORIDA There is an inverse relationship, which generally holds among EGIMs and operating expenses. Properties, which have higher expense ratios, typically sell for relatively less and therefore produce a lower EGIM. As will be illustrated in the Income Capitalization Approach of this report, the subject's operating expense ratio (OER) is estimated at 56.23% before reserves. The comparable sales indicate a range of expense ratios from 41.74% to 48.94%, while their EGIMs range from 5.30 to 5.84. Overall, we conclude to an EGIM of 4.00, which results in an "as is" value estimate in the EGIM Analysis of $9,500,000. SALES COMPARISON CONCLUSION The three valuation methods in the Sales Comparison Approach are shown below. The overall value via the Sales Comparison Approach is estimated at $9,200,000. Price Per Unit $9,600,000 NOI Per Unit $8,900,000 EGIM Analysis $9,500,000 Sales Comparison Conclusion $9,200,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 25 REGENCY OAKS, FERN PARK, FLORIDA INCOME CAPITALIZATION APPROACH The income capitalization approach is based on the premise that value is created by the expectation of future benefits. We estimated the present value of those benefits to derive an indication of the amount that a prudent, informed purchaser-investor would pay for the right to receive them as of the date of value. This approach requires an estimate of the NOI of a property. The estimated NOI is then converted to a value indication by use of either the direct capitalization or the discounted cash flow analysis (yield capitalization). Direct capitalization uses a single year's stabilized NOI as a basis for a value indication by dividing the income by a capitalization rate. The rate chosen accounts for a recapture of the investment by the investor and should reflect all factors that influence the value of the property, such as tenant quality, property condition, neighborhood change, market trends, interest rates, and inflation. The rate may be extracted from local market transactions or, when transaction evidence is lacking, obtained from trade sources. A discounted cash flow analysis focuses on the operating cash flows expected from the property and the proceeds of a hypothetical sale at the end of a holding period (the reversion). The cash flows and reversion are discounted to their present values using a market-derived discount rate and are added together to obtain a value indication. Because benefits to be received in the future are worth less than the same benefits received in the present, this method weights income in the early years more heavily than the income and the sale proceeds to be received later. The strength of the discounted cash flow method is its ability to recognize variations in projected net income, such as those caused by inflation, stepped leases, neighborhood change, or tenant turnover. Its weakness is that it requires many judgments regarding the actions of likely buyers and sellers of the property in the future. In some situations, both methods yield a similar result. The discounted cash flow method is typically more appropriate for the analysis of investment properties with multiple or long-term leases, particularly leases with cancellation clauses or renewal options. It is especially useful for multi-tenant properties in volatile markets. The direct capitalization AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26 REGENCY OAKS, FERN PARK, FLORIDA method is normally more appropriate for properties with relatively stable operating histories and expectations. A pro forma analysis for the first year of the investment is made to estimate a reasonable potential net operating income for the Subject Property. Such an analysis entails an estimate of the gross income the property should command in the marketplace. From this total gross income must be deducted an allowance for vacancy/collection loss and operating expenses as dictated by general market conditions and the overall character of the subject's tenancy and leased income to arrive at a projected estimate of net operating income. Conversion of the net operating income to an indication of value is accomplished by the process of capitalization, as derived primarily from market data. MARKET RENT ANALYSIS In order to determine a market rental rate for the subject, a survey of competing apartment communities was performed. This survey was displayed previously in the market analysis section of the report. Detailed information pertaining to each of the comparable rental communities, along with photographs, is presented in the Addenda of this report. The following charts display the subject's current asking and actual rent rates as well as a comparison with the previous referenced comparable rental properties. SUMMARY OF ACTUAL AVERAGE RENTS
Average Unit Area ---------------------- Unit Type (Sq. Ft.) Per Unit Per SF %Occupied ----------------------------------------------------------------------- Studio 589 $ 642 $1.09 100.0% 1Br/1Ba 719 $ 641 $0.89 95.8% 2Br/1.5Ba 984 $ 638 $0.65 93.5% 2Br/2Ba 1061 $ 955 $0.90 100.0% 2Br/2.5Ba 1800 $ 920 $0.51 91.0% 3Br/2Ba 1320 $ 900 $0.68 97.0% 3Br/2.5Ba 2070 $1,002 $0.48 100.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 27 REGENCY OAKS, FERN PARK, FLORIDA RENT ANALYSIS
COMPARABLE RENTS ------------------------------------------------- R-1 R-2 R-3 R-4 R-5 ------------------------------------------------- EMPRIAM HOWEL (FORMER BRANCH SEMORAN EMERALD BIRCHWOOD STATION SANDPIPER NORTH BAY) LANDING SUBJECT SUBJECT SUBJECT ------- --------- ------- --------- --------- UNIT ACTUAL ASKING COMPARISON TO SUBJECT DESCRIPTION TYPE RENT RENT Superior Superior Superior Superior Similar ------------------------ --------- ------- ------- -------- -------- -------- -------- ------- Monthly Rent Studio $ 642 $ ??? $ 520 $ 495 $ 590 $ 535 Unit Area (SF) 589 589 538 560 782 ??? Monthly Rent per Sq. Ft. $ ??? $ ??? $ ??? $ 0.88 $ 0.75 $ 0.97 Monthly Rent 1Br/1Ba $ 641 $ 519 $ 558 $ 495 $ 590 $ 579 $ 535 Unit Area (SF) 719 719 ??? ??? 782 720 550 Monthly Rent per Sq. Ft. $ 0.89 $ 0.72 $ 0.76 $ 0.88 $ 0.75 $ ??? $ 0.97 Monthly Rent 2Br/1.5Ba $ 638 $ 629 $ 655 $ 685 $ 685 $ 660 Unit Area (SF) ??? 964 1,037 1,024 ??? 950 Monthly Rent per Sq. Ft. ??? $ ??? $ 0.63 $ 0.66 $ 0.62 $ 0.69 Monthly Rent 2Br/2Ba $ 955 $ 649 $ 785 $ 705 $ 750 $ 610 Unit Area (SF) 1,061 ??? 1,102 1,076 1,280 976 Monthly Rent per Sq. Ft. $ ??? $ 0.61 $ ??? $ ??? $ 0.59 $ 0.63 Monthly Rent 2Br/2.5Ba $ 920 $ ??? $ 785 $ 745 ??? Unit Area (SF) ??? 1,800 1,102 1,146 ??? Monthly Rent per Sq. Ft. $ 0.51 $ 0.55 $ 0.65 $ 0.65 $ 0.59 Monthly Rent 3Br/2Ba $ ??? $ 874 $ 824 $ 805 $ 815 $ 815 Unit Area (SF) 1,320 1,320 1,417 ??? 1,357 1,270 Monthly Rent per Sq. Ft. $ 0.68 $ 0.66 $ 0.58 $ 0.63 $ ??? $ ??? Monthly Rent 3Br/2.5Ba $ 1,014 $ ??? $ 815 Unit Area (SF) 2,070 2,070 1,315 ??? Monthly Rent per Sq. Ft. $ ??? $ 0.64 $ ???
SUBJECT UNIT DESCRIPTION TYPE MIN MAX MEDIAN AVERAGE ------------------------ --------- ------- ------ -------- ------- Monthly Rent Studio $ 495 $ 590 $ 529 $ 535 Unit Area (SF) 534 782 555 648 Monthly Rent per Sq. Ft. $ 0.75 $ 1.09 $ 0.93 ??? Monthly Rent 1Br/1Ba $ 495 $ 590 $ 558 $ 561 Unit Area (SF) 550 782 720 669 Monthly Rent per Sq. Ft. $ 0.75 $ 0.97 $ 0.80 $ 0.84 Monthly Rent 2Br/1.5Ba $ 655 $ 685 $ 670 $ 670 Unit Area (SF) ??? ??? 1,051 1,031 Monthly Rent per Sq. Ft. $ 0.62 $ 0.69 $ 0.65 $ 0.65 Monthly Rent 2Br/2Ba $ 610 $ 715 $ ??? $ 695 Unit Area (SF) 976 1,200 ??? ??? Monthly Rent per Sq. Ft. $ 0.59 $ 0.90 $ 0.64 $ 0.63 Monthly Rent 2Br/2.5Ba $ 750 $ 745 $ 715 $ 723 Unit Area (SF) 1,102 1,200 1,146 ??? Monthly Rent per Sq. Ft. $ 0.59 $ 0.63 $ 0.65 ??? Monthly Rent 3Br/2Ba $ ??? $ 824 $ 815 $ 815 Unit Area (SF) 1,270 1,417 1,319 1,331 Monthly Rent per Sq. Ft. $ 0.58 $ ??? $ 0.41 $ ??? Monthly Rent 3Br/2.5Ba $ 815 $ 845 $ 830 $ ??? Unit Area (SF) 1,315 1,357 ??? 1,335 Monthly Rent per Sq. Ft. $ 0.60 $ 0.64 $ 0.62 $ 0.62
CONCLUDED MARKET RENTAL RATES AND TERMS Based on this analysis above, the subject's concluded market rental rates and gross rental income is calculated as follows: GROSS RENTAL INCOME PROJECTION
Market Rent Unit Area ------------------ Monthly Annual Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income --------- --------------- ---------- -------- ------ -------- ----------- Studio 32 589 $480 $0.81 $ 15,360 $ 184,320 1Br/1Ba 93 719 $500 $0.70 $ 46,500 $ 558,000 2Br/1.5Ba 112 984 $620 $0.63 $ 69,440 $ 833,280 2Br/2Ba 57 1,061 $630 $0.59 $ 35,910 $ 430,920 2Br/2.5Ba 25 1,800 $930 $0.52 $ 23,250 $ 279,000 3Br/2Ba 12 1,320 $840 $0.64 $ 10,080 $ 120,960 3Br/2.5Ba 12 2,070 $950 $0.46 $ 11,400 $ 136,800 -------- ----------- Total $211,940 $ 2,543,280 ======== ===========
PRO FORMA ANALYSIS For purposes of this appraisal, we were provided with income and expense data for the subject property. A summary of this data is presented as follows. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28 REGENCY OAKS, FERN PARK, FLORIDA SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002 FISCAL YEAR 2003 ----------------------- ----------------------- ----------------------- ----------------------- ACTUAL ACTUAL ACTUAL MANAGEMENT BUDGET ----------------------- ----------------------- ----------------------- ----------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT ------------------------ ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Revenues Rental Income $2,458,328 $ 7,167 $2,581,032 $ 7,525 $2,537,636 $ 7,398 $2,544,220 $ 7,418 Vacancy $ 233,457 $ 681 $ 324,527 $ 946 $ 469,222 $ 1,368 $ 380,764 $ 1,110 Credit Loss/Concessions $ 22,874 $ 67 $ 88,769 $ 259 $ 114,711 $ 334 $ 78,600 $ 229 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 256,331 $ 747 $ 413,296 $ 1,205 $ 583,933 $ 1,702 $ 459,364 $ 1,339 Laundry Income $ 39,854 $ 116 $ 25,363 $ 74 $ 20,645 $ 60 $ 33,096 $ 96 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 107,229 $ 313 $ 166,672 $ 486 $ 269,713 $ 786 $ 225,600 $ 658 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Subtotal Other Income $ 147,083 $ 429 $ 192,035 $ 560 $ 290,358 $ 847 $ 258,696 $ 754 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Effective Gross Income $2,349,080 $ 6,849 $2,359,771 $ 6,880 $2,244,061 $ 6,542 $2,343,552 $ 6,833 Operating Expenses Taxes $ 139,820 $ 408 $ 153,351 $ 447 $ 147,646 $ 430 $ 158,671 $ 463 Insurance $ 39,177 $ 114 $ 113,414 $ 331 $ 105,487 $ 308 $ 108,455 $ 316 Utilities $ 208,232 $ 607 $ 238,895 $ 696 $ 217,636 $ 635 $ 225,000 $ 656 Repair & Maintenance $ 118,108 $ 344 $ 108,380 $ 316 $ 74,832 $ 218 $ 73,440 $ 214 Cleaning $ 138,525 $ 404 $ 125,153 $ 365 $ 140,296 $ 409 $ 131,280 $ 383 Landscaping $ 116,333 $ 339 $ 90,443 $ 264 $ 150,006 $ 437 $ 125,640 $ 366 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 41,987 $ 122 $ 53,048 $ 155 $ 58,386 $ 170 $ 52,200 $ 152 General Administrative $ 413,804 $ 1,206 $ 387,469 $ 1,130 $ 298,082 $ 869 $ 319,752 $ 932 Management $ 119,727 $ 349 $ 128,930 $ 376 $ 112,330 $ 327 $ 129,038 $ 376 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total Operating Expenses $1,335,713 $ 3,894 $1,399,083 $ 4,079 $1,304,701 $ 3,804 $1,323,476 $ 3,859 Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net Income $1,013,367 $ 2,954 $ 960,688 $ 2,801 $ 939,360 $ 2,739 $1,020,076 $ 2,974 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
ANNUALIZED 2003 ----------------------- PROJECTION AAA PROJECTION ----------------------- ---------------------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT % ------------------------ ---------- ---------- ---------- ---------- ------ Revenues Rental Income $2,491,631 $ 7,264 $2,543,280 $ 7,415 100.0% Vacancy $ 304,817 $ 889 $ 305,194 $ 890 12.0% Credit Loss/Concessions $ 175,739 $ 512 $ 152,597 $ 445 6.0% ---------- ---------- ---------- ---------- ------ Subtotal $ 480,556 $ 1,401 $ 457,790 $ 1,335 18.0% Laundry Income $ 19,521 $ 57 $ 20,580 $ 60 0.8% Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0% Other Misc. Revenue $ 310,952 $ 907 $ 274,400 $ 800 10.8% ---------- ---------- ---------- ---------- ------ Subtotal Other Income $ 330,473 $ 963 $ 294,980 $ 860 11.6% ---------- ---------- ---------- ---------- ------ Effective Gross Income $2,341,548 $ 6,827 $2,380,470 $ 6,940 100.0% Operating Expenses Taxes $ 155,319 $ 453 $ 157,780 $ 460 6.6% Insurance $ 109,663 $ 320 $ 109,760 $ 320 4.6% Utilities $ 200,704 $ 585 $ 205,800 $ 600 8.6% Repair & Maintenance $ 60,981 $ 178 $ 68,600 $ 200 2.9% Cleaning $ 178,503 $ 520 $ 137,200 $ 400 5.8% Landscaping $ 209,927 $ 612 $ 154,350 $ 450 6.5% Security $ 0 $ 0 $ 0 $ 0 0.0% Marketing & Leasing $ 56,332 $ 164 $ 54,880 $ 160 2.3% General Administrative $ 270,219 $ 788 $ 343,000 $ 1,000 14.4% Management $ 89,527 $ 261 $ 107,121 $ 312 4.5% Miscellaneous $ 0 $ 0 $ 0 $ 0 0.0% ---------- ---------- ---------- ---------- ------ Total Operating Expenses $1,331,173 $ 3,881 $1,338,491 $ 3,902 56.2% Reserves $ 0 $ 0 $ 171,500 $ 500 12.8% ---------- ---------- ---------- ---------- ------ Net Income $1,010,375 $ 2,946 $ 870,478 $ 2,538 36.6% ---------- ---------- ---------- ---------- ------
REVENUES AND EXPENSES The subject's revenue and expense projections are displayed on the previous chart. Rental income is based on the market analysis previously discussed. Other income consists of forfeited deposits, laundry income, late rent payments, month to month fees, pet fees, vending machine revenue, etc. We forecasted the property's annual operating expenses after reviewing its historical performance at the subject property. We analyzed each item of expense and attempted to forecast amounts a typical informed investor would consider reasonable. VACANCY AND COLLECTION LOSS An investor is primarily interested in the annual revenue an income property is likely to produce over a specified period of time, rather than the income it could produce if it were always 100% occupied and all tenants were paying their rent in full and on time. An investor normally expects some income loss as tenants vacate, fail to pay rent, or pay their rent late. We have projected a stabilized vacancy and collection loss rate of 18% based on the subject's historical performance, as well as the anticipated future market conditions. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29 REGENCY OAKS, FERN PARK, FLORIDA RESERVES FOR REPLACEMENT "Reserves for replacements" is a contingency account allocated to the expenses of the property to provide for replacement of short-lived items and for unforeseen necessary capital expenditures. We have utilized the Korpacz Real Estate Investor Survey of the national apartment market, which reports a range of replacement reserves between $150 and $400 per unit. For purposes of this analysis, we have included an allowance of $500 per unit for reserves for replacement. CAPITAL EXPENDITURES Capital expenditures represent expenses for immediate repair or replacement of items that have average to long lives. Based on our inspection of the property as well as discussions with property management personnel, there are no major items remaining in need of repair or replacement that would require an expense beyond our reserves for replacement. Therefore an allowance of $500 per unit should be satisfactory in our reserves for replacement to cover future capital expenditures. DISCOUNTED CASH FLOW ANALYSIS As the subject is a multi-tenant income property, the Discounted Cash Flow Method is considered appropriate. This method is especially meaningful in that it isolates the timing of the annual cash flows and discounts them, along with the expected equity reversion, to a present value. The present value of the cash flow is added to the present value of the reversion, resulting in a total property value. INVESTMENT CRITERIA Appropriate investment criteria will be derived for the subject based upon analysis of comparable sales and a survey of real estate investors. The following table summarizes the findings of Korpacz National Investor Survey for the most recent period. KORPACZ NATIONAL INVESTOR SURVEY 3RD QUARTER 2003 NATIONAL APARTMENT MARKET
CAPITALIZATION RATES --------------------------------- GOING-IN TERMINAL -------------- --------------- Low High Low High ----- ----- ----- ------ Range 5.50% 9.50% 6.00% 10.00% Average 7.61% 8.14%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30 REGENCY OAKS, FERN PARK, FLORIDA SUMMARY OF OVERALL CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR --------- --------- ------ ---------- ------ I-1 May-03 94% $ 39,815 10.19% I-2 Nov-02 95% $ 34,797 9.60% I-3 Sep-02 95% $ 36,685 9.54% I-4 May-01 90% $ 38,125 10.98% I-5 Aug-01 95% $ 43,000 8.98% High 10.98% Low 8.98% Average 9.86%
Based on this information, we have concluded the subject's overall capitalization rate should be 9.75%. The terminal capitalization rate is applied to the net operating income estimated for the year following the end of the holding period. Based on the concluded overall capitalization rate, the age of the property and the surveyed information, we have concluded the subject's terminal capitalization rate to be 10.25%. Finally, the subject's discount rate or yield rate is estimated based on the previous investor survey and an examination of returns available on alternative investments in the market. Based on this analysis, the subject's discount rate is estimated to be 12.00%. HOLDING PERIOD The survey of investors indicates that most investors are completing either 10-year cash flows or extending the analysis to the end of the lease if it is more than 10-years. A 10-year period has been used in the analysis of the subject with the eleventh year stabilized NOI used to determine the reversion. SELLING COSTS Sales of similar size properties are typically accomplished with the aid of a broker and will also incur legal and other transaction related cost. Based on our survey of brokers and a review of institutional investor projections, an allowance of 2.00% of the sale amount is applied. DISCOUNTED CASH FLOW CONCLUSION Discounting the annual cash flows and the equity reversion at the selected rate of 12.00% indicates a value of $8,700,000. In this instance, the reversion figure contributes approximately 36% of the total value. Investors surveyed for this assignment indicated they AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31 REGENCY OAKS, FERN PARK, FLORIDA would prefer to have the cash flow contribute anywhere from 50% to 60%. Overall, the blend seems reasonable. The cash flow and pricing matrix are located as follow. DISCOUNTED CASH FLOW ANALYSIS REGENCY OAKS
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009 FISCAL YEAR 1 2 3 4 5 6 ----------------------------------- ---------- ---------- ---------- ---------- ---------- ---------- REVENUE Base Rent $2,543,280 $2,606,862 $2,672,034 $2,738,834 $2,807,305 $2,877,488 Vacancy $ 305,194 $ 312,823 $ 320,644 $ 328,660 $ 336,877 $ 345,299 Credit Loss $ 152,597 $ 156,412 $ 160,324 $ 164,330 $ 168,438 $ 172,649 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- ---------- Subtotal $ 457,790 $ 469,235 $ 480,966 $ 492,990 $ 505,315 $ 517,948 Laundry Income $ 20,580 $ 21,095 $ 21,622 $ 22,162 $ 22,716 $ 23,284 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 274,400 $ 281,260 $ 288,292 $ 295,499 $ 302,886 $ 310,458 ---------- ---------- ---------- ---------- ---------- ---------- Subtotal Other Income $ 294,980 $ 302,355 $ 309,913 $ 317,661 $ 325,603 $ 333,743 ---------- ---------- ---------- ---------- ---------- ---------- EFFECTIVE GROSS INCOME $2,380,470 $2,439,981 $2,500,981 $2,563,505 $2,627,593 $2,693,283 OPERATING EXPENSES: Taxes $ 157,780 $ 162,513 $ 167,389 $ 172,410 $ 177,583 $ 182,910 Insurance $ 109,760 $ 113,053 $ 116,444 $ 119,938 $ 123,536 $ 127,242 Utilities $ 205,800 $ 211,974 $ 218,333 $ 224,883 $ 231,630 $ 238,579 Repair & Maintenance $ 68,600 $ 70,658 $ 72,778 $ 74,961 $ 77,210 $ 79,526 Cleaning $ 137,200 $ 141,316 $ 145,555 $ 149,922 $ 154,420 $ 159,052 Landscaping $ 154,350 $ 158,981 $ 163,750 $ 168,662 $ 173,722 $ 178,934 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 54,880 $ 56,526 $ 58,222 $ 59,969 $ 61,768 $ 63,621 General Administrative $ 343,000 $ 353,290 $ 363,889 $ 374,805 $ 386,050 $ 397,631 Management $ 107,121 $ 109,799 $ 112,544 $ 115,358 $ 118,242 $ 121,198 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- ---------- TOTAL OPERATING EXPENSES $1,338,491 $1,378,110 $1,418,905 $1,460,909 $1,504,159 $1,548,693 Reserves $ 171,500 $ 176,645 $ 181,944 $ 187,403 $ 193,025 $ 198,816 ---------- ---------- ---------- ---------- ---------- ---------- NET OPERATING INCOME $ 870,478 $ 885,226 $ 900,132 $ 915,194 $ 930,409 $ 945,774 ========== ========== ========== ========== ========== ========== Operating Expense Ratio (% of EGI) 56.2% 56.5% 56.7% 57.0% 57.2% 57.5% Operating Expense Per Unit $ 3,902 $ 4,018 $ 4,137 $ 4,259 $ 4,385 $ 4,515
YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014 FISCAL YEAR 7 8 9 10 11 ----------------------------------- ---------- ---------- ---------- ---------- ---------- REVENUE Base Rent $2,949,425 $3,023,161 $3,098,740 $3,176,208 $3,255,613 Vacancy $ 353,931 $ 362,779 $ 371,849 $ 381,145 $ 390,674 Credit Loss $ 176,966 $ 181,390 $ 185,924 $ 190,572 $ 195,337 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- Subtotal $ 530,897 $ 544,169 $ 557,779 $ 571,717 $ 586,010 Laundry Income $ 23,866 $ 24,463 $ 25,075 $ 25,702 $ 26,344 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 318,220 $ 326,175 $ 334,330 $ 342,688 $ 351,255 ---------- ---------- ---------- ---------- ---------- Subtotal Other Income $ 342,086 $ 350,639 $ 359,404 $ 368,390 $ 377,599 ---------- ---------- ---------- ---------- ---------- EFFECTIVE GROSS INCOME $2,760,615 $2,829,630 $2,900,371 $2,972,880 $3,047,202 OPERATING EXPENSES: Taxes $ 188,398 $ 194,049 $ 199,871 $ 205,867 $ 212,043 Insurance $ 131,059 $ 134,991 $ 139,041 $ 143,212 $ 147,508 Utilities $ 245,736 $ 253,108 $ 260,701 $ 268,522 $ 276,578 Repair & Maintenance $ 81,912 $ 84,369 $ 86,900 $ 89,507 $ 92,193 Cleaning $ 163,824 $ 168,739 $ 173,801 $ 179,015 $ 184,385 Landscaping $ 184,302 $ 189,831 $ 195,526 $ 201,392 $ 207,433 Security $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 65,530 $ 67,495 $ 69,520 $ 71,606 $ 73,754 General Administrative $ 409,560 $ 421,847 $ 434,502 $ 447,537 $ 460,963 Management $ 124,228 $ 127,333 $ 130,517 $ 133,780 $ 137,124 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 ---------- ---------- ---------- ---------- ---------- TOTAL OPERATING EXPENSES $1,594,548 $1,641,763 $1,690,379 $1,740,438 $1,791,982 Reserves $ 204,780 $ 210,923 $ 217,251 $ 223,769 $ 230,482 NET OPERATING INCOME $ 961,287 $ 976,944 $ 992,741 $1,008,674 $1,024,738 ---------- ---------- ---------- ---------- ---------- Operating Expense Ratio (% of EGI) 57.8% 58.0% 58.3% 58.5% 58.8% Operating Expense Per Unit $ 4,649 $ 4,786 $ 4,928 $ 5,074 $ 5,224
Estimated Stabilized NOI $870,478 Sales Expense Rate 2.00% Months to Stabilized 1 Discount Rate 12.00% Stabilized Occupancy 88.0% Terminal Cap Rate 10.25%
"DCF" VALUE ANALYSIS Gross Residual Sale Price $9,997,447 Deferred Maintenance $ 0 Less: Sales Expense $ 199,949 Add: Excess Land $ 0 ---------- Other Adjustments $ 0 Net Residual Sale Price $9,797,498 ---------- PV of Reversion $3,154,532 Value Indicated By "DCF" $8,673,612 Add: NPV of NOI $5,519,080 Rounded $8,700,000 ---------- PV Total $8,673,612
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE -------------------------------------------------------------- TOTAL VALUE 11.50% 11.75% 12.00% 12.25% 12.50% -------------------- ---------- ---------- ---------- ---------- ---------- 9.75% $9,113,751 $8,973,071 $8,835,383 $8,700,612 $8,568,686 10.00% $9,027,049 $8,888,290 $8,752,476 $8,619,533 $8,489,391 TERMINAL CAP 10.25% $8,944,577 $8,807,645 $8,673,612 $8,542,408 $8,413,963 RATE 10.50% $8,866,032 $8,730,839 $8,598,504 $8,468,957 $8,342,128 10.75% $8,791,141 $8,657,607 $8,526,890 $8,398,921 $8,273,633
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32 REGENCY OAKS, FERN PARK, FLORIDA INCOME LOSS DURING LEASE-UP The subject is currently near or at a stabilized condition. Therefore, there is no income loss during lease-up at the subject property. CONCESSIONS Concessions have historically not been utilized at the subject property or in the subject's market. Therefore, no adjustment was included for concessions. DIRECT CAPITALIZATION METHOD After having projected the income and expenses for the property, the next step in the valuation process is to capitalize the net income into an estimate of value. The selected overall capitalization rate ("OAR") covers both return on and return of capital. It is the overall rate of return an investor expects. After considering the market transactions and the investor surveys, we previously conclude that an overall rate of 9.75% percent is applicable to the subject. The results of our direct capitalization analysis are as follows: AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33 REGENCY OAKS, FERN PARK, FLORIDA REGENCY OAKS
TOTAL PER SQ. FT. PER UNIT %OF EGI ------------------------------------------------------------------------------------------- REVENUE Base Rent $2,543,280 $ 7.43 $ 7,415 Less: Vacancy & Collection Loss 18.00% $ 457,790 $ 1.34 $ 1,335 Plus: Other Income Laundry Income $ 20,580 $ 0.06 $ 60 0.86% Garage Revenue $ 0 $ 0.00 $ 0 0.00% Other Misc. Revenue $ 274,400 $ 0.80 $ 800 11.53% --------------------------------------------- Subtotal Other Income $ 294,980 $ 0.86 $ 860 12.39% EFFECTIVE GROSS INCOME $2,380,470 $ 6.96 $ 6,940 OPERATING EXPENSES: Taxes $ 157,780 $ 0.46 $ 460 6.63% Insurance $ 109,760 $ 0.32 $ 320 4.61% Utilities $ 205,800 $ 0.60 $ 600 8.65% Repair & Maintenance $ 68,600 $ 0.20 $ 200 2.88% Cleaning $ 137,200 $ 0.40 $ 400 5.76% Landscaping $ 154,350 $ 0.45 $ 450 6.48% Security $ 0 $ 0.00 $ 0 0.00% Marketing & Leasing $ 54,880 $ 0.16 $ 160 2.31% General Administrative $ 343,000 $ 1.00 $ 1,000 14.41% Management 4.50% $ 107,121 $ 0.31 $ 312 4.50% Miscellaneous $ 0 $ 0.00 $ 0 0.00% TOTAL OPERATING EXPENSES $1,338,491 $ 3.91 $ 3,902 56.23% Reserves $ 171,500 $ 0.50 $ 500 7.20% --------------------------------------------- NET OPERATING INCOME $ 870,478 $ 2.54 $ 2,538 36.57% "GOING IN" CAPITALIZATION RATE 9.75% VALUE INDICATION $8,927,984 $26.10 $ 26,029 "AS IS" VALUE INDICATION (DIRECT CAPITALIZATION APPROACH) $8,927,984 ROUNDED $8,900,000 $26.02 $ 25,948
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34 REGENCY OAKS, FERN PARK, FLORIDA DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF ----------------------------------------------------------- 9.00% $9,671,983 $9,700,000 $28,280 $28.36 9.25% $9,410,578 $9,400,000 $27,405 $27.48 9.50% $9,162,931 $9,200,000 $26,822 $26.89 9.75% $8,927,984 $8,900,000 $25,948 $26.02 10.00% $8,704,785 $8,700,000 $25,364 $25.43 10.25% $8,492,473 $8,500,000 $24,781 $24.85 10.50% $8,290,271 $8,300,000 $24,198 $24.26
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD Applying the capitalization rate to our estimated NOI results in an estimated value of $8,900,000. CORRELATION AND CONCLUSION BY THE INCOME APPROACH The two methods used to estimate the market value of the subject property by the income approach resulted in the following indications of value: Discounted Cash Flow Analysis $8,700,000 Direct Capitalization Method $8,900,000
Giving consideration to the indicated values provided by both techniques, we have concluded the estimated value by the income capitalization approach to be $8,800,000. AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 35 REGENCY OAKS, FERN PARK, FLORIDA RECONCILIATION AND CONCLUSION This appraisal was made to express an opinion as of the Market Value of the fee simple estate in the property. AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE Cost Approach Not Utilized Sales Comparison Approach $9,200,000 Income Approach $8,800,000 Reconciled Value $8,800,000
The Income Capitalization Method is considered a reliable indicator of value. Income and expenses were estimated and projected based on historical operating statements and market oriented expenses. This method is primarily used by investors in their underwriting analysis. Furthermore, there was good support for an overall rate in the Direct Capitalization Method. The Sales Comparison Approach to value supported the value conclusion by the Income Approach and was given secondary consideration. Investment-grade, income-producing properties such as the subject are not typically traded based on cost. Therefore, the Cost Approach has not been considered in our valuation. FINAL VALUE - FEE SIMPLE ESTATE Based on the investigation and premise outlined, it is our opinion that as of December 9, 2003 the market value of the fee simple estate in the property is: $8,800,000 AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA REGENCY OAKS, FERN PARK, FLORIDA ADDENDA AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A REGENCY OAKS, FERN PARK, FLORIDA EXHIBIT A SUBJECT PHOTOGRAPHS AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A REGENCY OAKS, FERN PARK, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] APARTMENT BUILDING - FRONT VIEW APARTMENT BUILDING - SIDE VIEW [PICTURE] [PICTURE] COURTYARD VIEW APARTMENT BUILDING - PARKING VIEW [PICTURE] [PICTURE] CLUBHOUSE EXTERIOR VIEW - COVERED PARKING AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A REGENCY OAKS, FERN PARK, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] SPORT COURTS SWIMMING POOL [PICTURE] [PICTURE] PICNIC AREA INTERIOR VACANT UNIT - LIVING ROOM [PICTURE] [PICTURE] INTERIOR VACANT UNIT - KITCHEN INTERIOR VACANT UNIT - BATHROOM AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B REGENCY OAKS, FERN PARK, FLORIDA EXHIBIT B SUMMARY OF RENT COMPARABLES AND PHOTOGRAPH OF COMPARABLES AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B REGENCY OAKS, FERN PARK, FLORIDA PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3 EMPIRIAN (FORMERLY KNOWN AS EMERALD BAY) SEDGEFIELD APARTMENTS LA ALOMA 5 Autumn Breeze Way 110 Sedgefield Circle 3040 Aloma Avenue Winter Park, FL Winter Park, FL Winter Park, FL [PICTURE] [PICTURE] [PICTURE] COMPARABLE I-4 COMPARABLE I-5 COURTYARD AT WINTER PARK THE ASHLEY OF SPRING VALLEY 1695 Lee Road 693 S Wymore Road Winter Park, FL Altamonte Springs, FL [PICTURE] [PICTURE]
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B REGENCY OAKS, FERN PARK, FLORIDA SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE DESCRIPTION SUBJECT R - 1 ------------------------------------------------------------------------------------------------------------------------------------ Property Name Regency Oaks Howel Branch Station Management Company AIMCO Brighton Residential LOCATION: Address 200 Maltese Circle 416 Banyon Tree Circle City, State Fern Park, Florida Maitland, FL County Seminole Seminole Proximity to Subject Same neighborhood PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 342,080 349,530 Year Built 1969 1969 Effective Age 25 34 Building Structure Type Brick and Stucco Brick Parking Type (Gr., Cov., etc.) Open, Plus some carports Open Number of Units 343 366 Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo. 1 Studio 589 32 $ 642 1 Studio 538 76 $520 2 1Br/1Ba 719 93 $ 641 2 1Br/1Ba 667 18 $550 3 2Br/1.5Ba 984 112 $ 638 2 1Br/1Ba 750 64 $560 4 2Br/2Ba 1,061 57 $ 955 3 2Br/1Ba 1,037 62 $655 5 2Br/2.5Ba 1,800 25 $ 920 4 2Br/2Ba 1,102 56 $715 6 3Br/2Ba 1,320 12 $ 900 5 2Br/2Ba 1,102 56 $715 7 3Br/2.5Ba 2,070 12 $1,002 6 3Br/2Ba 1,328 32 $810 6 3Br/2Ba 1,481 44 $835 Average Unit Size (SF) 997 971 Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 1-Bedroom 3-Bedroom 1-Bedroom 3-Bedroom CONDITION: Average APPEAL: Average AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling X Balcony X Balcony X Fireplace Fireplace Cable TV Ready Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool Spa/Jacuzzi X Car Wash Spa/Jacuzzi X Car Wash Basketball Court X BBQ Equipment Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball X Meeting Hall Sand Volley Ball Meeting Hall X Tennis Court Secured Parking Tennis Court Secured Parking Racquet Ball X Laundry Room Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track Business Office Gym Room X Freshwater Lake Gym Room X Freshwater Lake X Basketball Court Basketball Court X Picnic Area Picnic Area OCCUPANCY: 92% 86% LEASING DATA: Available Leasing Terms 6 to 12 months 6 to 12 months Concessions On specified units only Pet Deposit No Pets Allowed Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas X Water X Trash X Water X Trash Confirmation Manager Leasing Agent Telephone Number 813-933-2449 407-671-7200 NOTES: Attractive apartment community located in subject's neighborhood. All brick, good condition, good curb appeal. Overall, superior to the subject property. COMPARISON TO SUBJECT: Superior COMPARABLE COMPARABLE DESCRIPTION R - 2 R - 3 ------------------------------------------------------------------------------------------------------------------------------------ Property Name Sandpiper Semoran North Management Company Community Management Calex Realty Group LOCATION: Address 709 Sandpiper Lane 1743 Semoran North Circle City, State Casselberry, FL Winter Park, FL County Seminole Seminole Proximity to Subject Same neighborhood Same neighborhood PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 178,752 381,408 Year Built 1974 1964 Effective Age 29 30 Building Structure Type Stucco Stucco Parking Type (Gr., Cov., etc.) Open Open, plus some carports Number of Units 196 348 Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo. 1 1Br/1Ba 560 80 $495 1 1Br/1Ba 782 $590 2 1Br/1Ba 560 80 $495 2 1Br/1Ba 782 $590 3 2Br/1.5Ba 1,024 18 $680 3 2Br/1Ba 1,112 $685 4 2Br/2Ba 1,076 36 $705 4 2Br/2Ba 1,200 $710 5 2Br/2Ba 1,146 24 $745 5 2Br/2Ba 1,200 $710 6 3Br/2Ba 1,281 20 $805 6 3Br/2Ba 1,357 $815 7 3Br/2Ba 1,315 18 $845 7 3Br/2Ba 1,357 $815 Average Unit Size (SF) 810 Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 1-Bedroom 3-Bedroom 1-Bedroom 3-Bedroom CONDITION: Slightly Superior Slightly Superior APPEAL: Good Slightly Superior AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling X Balcony X Balcony X Fireplace Fireplace Cable TV Ready Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash Basketball Court BBQ Equipment Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall Tennis Court Secured Parking Tennis Court Secured Parking Racquet Ball X Laundry Room Racquet Ball X Laundry Room Jogging Track Business Office Jogging Track Business Office X Gym Room Freshwater Lake X Gym Room Freshwater Lake Basketball Court Basketball Court Picnic Area Picnic Area OCCUPANCY: 90% N/A LEASING DATA: Available Leasing Terms 6 to 13 months 6 to 12 months Concessions On specified units only One Month Free Rent Pet Deposit Yes Yes Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas X Water X Trash X Water X Trash Confirmation Leasing Agent Leasing Agent Telephone Number 407-831-6866 407-671-5957 NOTES: Nearby apartment community, but generally Nearby apartment community located in same inferior location along secondary street neighborhood in a similar retail/commercial with limited curb appear and in similar to area just off Rt 436. Superior to subject in inferior condition compared to the subject terms of overall curb appeal and condition. property. Overall, considered to be an Also slightly superior location. inferior apartment community. COMPARISON TO SUBJECT: Superior Superior COMPARABLE COMPARABLE DESCRIPTION R - 4 R - 5 ------------------------------------------------------------------------------------------------------------------------------------ Property Name Empiriam (Former Emerald Bay) Birchwood Landing Management Company Empire Equity Group Casselberry Equity LOCATION: Address 5 Autumn Breeze Way 1485 Ash Circle City, State Winter Park, FL Casselberry, FL County Seminole Seminole Proximity to Subject Same neighborhood Same neighborhood PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 427,680 114,080 Year Built 1972 1975 Effective Age 25 28 Building Structure Type Stucco Stucco Parking Type (Gr., Cov., etc.) Open, plus some carports Open Number of Units 432 184 Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo. 2 1Br/1Ba 720 149 $579 1 1Br/1Ba 550 $535 4 2Br/2Ba 976 132 $610 2 1Br/1Ba 550 $535 6 3Br/2Ba 1,270 151 $815 3 2Br/1Ba 950 $660 Average Unit Size (SF) 990 Unit Breakdown: Efficiency 2-Bedroom Efficiency 2-Bedroom 1-Bedroom 3-Bedroom 1-Bedroom 3-Bedroom CONDITION: Average Average APPEAL: Average Average AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling X Balcony X Balcony Fireplace Fireplace Cable TV Ready Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool Spa/Jacuzzi X Car Wash Spa/Jacuzzi Car Wash Basketball Court BBQ Equipment Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall X Tennis Court Secured Parking Tennis Court Secured Parking Racquet Ball X Laundry Room Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track Business Office X Gym Room Freshwater Lake Gym Room Freshwater Lake X Basketball Court Basketball Court X Picnic Area Picnic Area OCCUPANCY: N/A N/A LEASING DATA: Available Leasing Terms 6 to 12 months 6 to 12 months Concessions No $299 Move-in special Pet Deposit Yes Yes Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas X Water X Trash X Water X Trash Confirmation Leasing Agent Leasing Agent Telephone Number 407-671-7722 407-657-6716 NOTES: Nearby apartment community located in same Located along Rt 436 very near the subject neighborhood in a similar retail/commercial property. Most similar in terms of location. area just off Rt 436. Superior to subject in Also very similar in terms of overall curb terms of overall curb appeal and condition. appeal and condition. Also slightly superior location. COMPARISON TO SUBJECT: Superior Similar
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B REGENCY OAKS, FERN PARK, FLORIDA PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3 HOWEL BRANCH STATION SANDPIPER SEMORAN NORTH 416 Banyon Tree Circle 709 Sandpiper Lane 1743 Semoran North Circle Maitland, FL Casselberry, FL Winter Park, FL N/A [PICTURE] N/A COMPARABLE R-4 COMPARABLE R-5 EMPIRIAM (FORMER EMERALD BAY) BIRCHWOOD LANDING 5 Autumn Breeze Way 1485 Ash Circle Winter Park, FL Casselberry, FL [PICTURE] [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C REGENCY OAKS, FERN PARK, FLORIDA EXHIBIT C ASSUMPTIONS AND LIMITING CONDITIONS (3 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C REGENCY OAKS, FERN PARK, FLORIDA No responsibility is assumed for matters legal in nature. No investigation has been made of the title to or any liabilities against the property appraised. In this appraisal, it is presumed that, unless otherwise noted, the owner's claim is valid, the property rights are good and marketable, and there are no encumbrances which cannot be cleared through normal processes. To the best of our knowledge, all data set forth in this report are true and accurate. Although gathered from reliable sources, no guarantee is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others which have been used in formulating this analysis. Land areas and descriptions used in this appraisal were obtained from public records and have not been verified by legal counsel or a licensed surveyor. No soil analysis or geological studies were ordered or made in conjunction with this report, nor were any water, oil, gas, or other subsurface mineral and use rights or conditions investigated. Substances such as asbestos, urea-formaldehyde foam insulation, other chemicals, toxic wastes, or other potentially hazardous materials could, if present, adversely affect the value of the property. Unless otherwise stated in this report, the existence of hazardous substance, which may or may not be present on or in the property, was not considered by the appraiser in the development of the conclusion of value. The stated value estimate is predicated on the assumption that there is no material on or in the property that would cause such a loss in value. No responsibility is assumed for any such conditions, and the client has been advised that the appraiser is not qualified to detect such substances, quantify the impact on values, or develop the remedial cost. No environmental impact study has been ordered or made. Full compliance with applicable federal, state, and local environmental regulations and laws is assumed unless otherwise stated, defined, and considered in the report. It is also assumed that all required licenses, consents, or other legislative or administrative authority from any local, state, or national government or private entity organization either have been or can be obtained or renewed for any use which the report covers. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C REGENCY OAKS, FERN PARK, FLORIDA It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless a nonconformity has been stated, defined, and considered in the appraisal report. Further, it is assumed that the utilization of the land and improvements is within the boundaries of the property described and that no encroachment or trespass exists unless noted in the report. The Americans with Disabilities Act ("ADA") became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the act. If so, this fact could have a negative effect on the value of the property. Since we have no direct evidence relating to this issue, we did not consider the possible noncompliance with the requirements of ADA in estimating the value of the property. We have made a physical inspection of the property and noted visible physical defects, if any, in our report. This inspection was made by individuals generally familiar with real estate and building construction. However, these individuals are not architectural or structural engineers who would have detailed knowledge of building design and structural integrity. Accordingly, we do not opine on, nor are we responsible for, the structural integrity of the property including its conformity to specific governmental code requirements, such as fire, building and safety, earthquake, and occupancy, or any physical defects which were not readily apparent to the appraiser during the inspection. The value or values presented in this report are based upon the premises outlined herein and are valid only for the purpose or purposes stated. The date of value to which the conclusions and opinions expressed apply is set forth in this report. The value opinion herein rendered is based on the status of the national business economy and the purchasing power of the U.S. dollar as of that date. Testimony or attendance in court or at any other hearing is not required by reason of this appraisal unless arrangements are previously made within a reasonable time in advance for AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C REGENCY OAKS, FERN PARK, FLORIDA such testimony, and then such testimony shall be at American Appraisal Associates, Inc.'s, prevailing per diem for the individuals involved. Possession of this report or any copy thereof does not carry with it the right of publication. No portion of this report (especially any conclusion to use, the identity of the appraiser or the firm with which the appraiser is connected, or any reference to the Appraisal Institute or the designations awarded by this organization) shall be disseminated to the public through prospectus, advertising, public relations, news, or any other means of communication without the written consent and approval of American Appraisal Associates, Inc. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D REGENCY OAKS, FERN PARK, FLORIDA EXHIBIT D CERTIFICATE OF APPRAISER (1 PAGE) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D REGENCY OAKS, FERN PARK, FLORIDA CERTIFICATE OF APPRAISER I certify that, to the best of my knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and represent the unbiased professional analyses, opinions, and conclusions of American Appraisal Associates, Inc. American Appraisal Associates, Inc. and I personally, have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. Compensation for American Appraisal Associates, Inc. is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. I personally did not inspect the subject property. Alice MacQueen provided significant real property appraisal assistance in the preparation of this report. I am currently in compliance with the Appraisal Institute's continuing education requirements. -s- Frank Fehribach ------------------------------ Frank Fehribach, MAI Managing Principal, Real Estate Group Texas State Certified General Real Estate Appraiser #TX-1323954-G AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D REGENCY OAKS, FERN PARK, FLORIDA CERTIFICATE OF APPRAISER I certify that, to the best of my knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and represent the unbiased professional analyses, opinions, and conclusions of American Appraisal Associates, Inc. American Appraisal Associates, Inc. and I personally, have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. Compensation for American Appraisal Associates, Inc. is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. I personally inspected the subject property and provided significant real property appraisal assistance in the preparation of this report. -s- Alice MacQueen --------------------------- Alice MacQueen Florida Certified General Real Estate Appraiser #RZ0002202 AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E REGENCY OAKS, FERN PARK, FLORIDA EXHIBIT E QUALIFICATIONS OF APPRAISER (4 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E REGENCY OAKS, FERN PARK, FLORIDA FRANK A. FEHRIBACH, MAI MANAGING PRINCIPAL, REAL ESTATE GROUP POSITION Frank A. Fehribach is a Managing Principal for the Dallas Real Estate Group of American Appraisal Associates, Inc. ("AAA"). EXPERIENCE Valuation Mr. Fehribach has experience in valuations for resort hotels; Class A office buildings; Class A multifamily complexes; industrial buildings and distribution warehousing; multitract mixed-use vacant land; regional malls; residential subdivision development; and special-purpose properties such as athletic clubs, golf courses, manufacturing facilities, nursing homes, and medical buildings. Consulting assignments include development and feasibility studies, economic model creation and maintenance, and market studies. Mr. Fehribach also has been involved in overseeing appraisal and consulting assignments in Mexico and South America. Business Mr. Fehribach joined AAA as an engagement director in 1998. He was promoted to his current position in 1999. Prior to that, he was a manager at Arthur Andersen LLP. Mr. Fehribach has been in the business of real estate appraisal for over ten years. EDUCATION University of Texas - Arlington Master of Science - Real Estate University of Dallas Master of Business Administration - Industrial Management Bachelor of Arts - Economics AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E REGENCY OAKS, FERN PARK, FLORIDA STATE CERTIFICATIONS State of Arizona, Certified General Real Estate Appraiser, #30828 State of Arkansas, State Certified General Appraiser, #CG1387N State of Colorado, Certified General Appraiser, #CG40000445 State of Georgia, Certified General Real Property Appraiser, #218487 State of Michigan, Certified General Appraiser, #1201008081 State of Texas, Real Estate Salesman License, #407158 (Inactive) State of Texas, State Certified General Real Estate Appraiser, #TX-1323954-G PROFESSIONAL Appraisal Institute, MAI Designated Member AFFILIATIONS Candidate Member of the CCIM Institute pursuing Certified Commercial Investment Member (CCIM) designation PUBLICATIONS "An Analysis of the Determinants of Industrial Property Valuation," Co-authored with Dr. Ronald C. Rutherford and Dr. Mark Eakin, The Journal of Real Estate Research, Vol. 8, No. 3, Summer 1993, p. 365. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E REGENCY OAKS, FERN PARK, FLORIDA ALICE MACQUEEN STATE CERTIFIED GENERAL REAL ESTATE APPRAISER POSITION Alice MacQueen is a State Certified General Real Estate Appraiser and principal member of 3P, Inc., a consulting firm with offices in Georgia and Utah. EXPERIENCE BUSINESS Mrs. MacQueen was employed by American Appraisal Associates, Inc., from 1983 until 2003 when she formed 3P, Inc. During her 20 year tenure with AAA, Ms. MacQueen held numerous positions within the firm, advancing from the professional staff levels to serve as Regional Director for the Southeastern United States (1987 to 1992) and as National Director of the Real Estate Valuation Group (1992 to 1995). During her later years with the firm, Ms. MacQueen continued to serve as an officer in the company, working as Principal/Vice President actively involved in the valuation of a wide variety of property types, including numerous types of special purpose properties. Prior to joining American Appraisal, Ms. MacQueen was involved in property management for five years and spent an additional five years as an appraiser, consultant and research analyst. VALUATION Ms. MacQueen has extensive experience in the appraisal of residential, commercial, industrial and special purpose properties and is annually involved in the valuation of several billion dollars of real property. She has also been involved in land planning analysis for major mixed use developments. Special purpose properties appraised include campgrounds, churches, country clubs and golf courses, data centers, historic landmarks, proprietary cemeteries and schools. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E REGENCY OAKS, FERN PARK, FLORIDA More recently, she has had extensive experience in appraising residential and industrial properties on Indian reservations as was instrumental in developing a major housing study for the Navajo reservation. The purposes of these valuations have included allocation of purchase price, charitable donation, financing, purchase and sale, syndication, and financial reporting. Ms. MacQueen has completed appraisals of commercial and residential real estate. He has also generated discounted cash flow and sensitivity analyses for investment-grade real estate, securitization, and pension funds/insurance industries. Analyses he has performed involve various types of investment- grade real estate throughout the continental United States including apartments, cooperatives, hotels, industrial and research and development parks, office buildings, regional shopping centers, and undeveloped acreage. To date, she has provided appraisal and consulting services in 48 states, Mexico and Puerto Rico. EDUCATION Greenbrier College for Women, Liberal Arts Realtors Institute of Virginia VALUATION AND SPECIAL Ms. MacQueen completes several courses annually as part COURSES of the continuing education requirements of the various states in which she is certified. She also attends real estate and financial industry-related conferences and seminars. In recent years, she prepared background information for HUD pertaining to valuation requirements for Indian lands and presented findings related to housing needs and financing issues on reservations. STATE-CERTIFICATED GENERAL APPRAISER Florida, No. RZ0002202, expires 11/30/04 Georgia, No. 239776, expires 7/31/04 New Mexico, No. 001626, expires 4/30/05 North Carolina, No. A5096, expires 6/30/04 Utah, No. CG 00057001, expires 7/1/05 AMERICAN APPRAISAL ASSOCIATES, INC. REGENCY OAKS, FERN PARK, FLORIDA GENERAL SERVICE CONDITIONS AMERICAN APPRAISAL ASSOCIATES, INC. REGENCY OAKS, FERN PARK, FLORIDA GENERAL SERVICE CONDITIONS The services(s) provided by AAA will be performed in accordance with professional appraisal standards. Our compensation is not contingent in any way upon our conclusions of value. We assume, without independent verification, the accuracy of all data provided to us. We will act as an independent contractor and reserve the right to use subcontractors. All files, workpapers or documents developed by us during the course of the engagement will be our property. We will retain this data for at least five years. Our report is to be used only for the specific purpose stated herein; and any other use is invalid. No reliance may be made by any third party without our prior written consent. You may show our report in its entirety to those third parties who need to review the information contained herein. No one should rely on our report as a substitute for their own due diligence. We understand that our reports will be described in public tender offer documents distributed to limited partners. We reserve the right to review the public tender offer documents prior to their issuance to confirm that disclosures of facts from the current appraisals are accurate. No reference to our name or our report, in whole or in part, in any other SEC filing or private placement memorandum you prepare and/or distribute to third parties may be made without our prior written consent. The Tender Offer Partnerships, as that term is defined in the Settlement Agreement, agree to indemnify and hold us harmless against and from any and all losses, claims, actions, damages, expenses or liabilities, including reasonable attorneys' fees, to which we may become subject in connection with this engagement except where such losses, claims, actions, damages, expenses or liabilities, including reasonable attorney's fees, arise or result from AAA's misconduct, bad faith or negligence. Co-Clients will not be liable for any of our acts or omissions. AAA is an equal opportunity employer.