EX-99.(C)(1) 3 d07248a2exv99wxcyx1y.txt APPRAISAL OF GREENSPOINT GREENSPOINT 4202 E. CACTUS RD PHOENIX, ARIZONA MARKET VALUE - FEE SIMPLE ESTATE AS OF MAY 6, 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] [AMERICAN APPRAISAL ASSOCIATES(R) LOGO] [AMERICAN APPRAISAL ASSOCIATES(R) LETTERHEAD] JULY 14, 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: GREENSPOINT 4202 E. CACTUS RD PHOENIX, MARICOPA COUNTY, ARIZONA 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 336 units with a total of 278,064 square feet of rentable area. The improvements were built in 1985. The improvements are situated on 9.25 acres. Overall, the improvements are in good condition. As of the date of this appraisal, the subject property is 91% 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 GREENSPOINT, PHOENIX, ARIZONA 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 May 6, 2003 is: ($14,500,000) Respectfully submitted, AMERICAN APPRAISAL ASSOCIATES, INC. /s/ Douglas Needham July 14, 2003 Douglas Needham, MAI #053272 Managing Principal, Real Estate Group Arizona State Certified General Real Estate Appraiser #30943 Report By: Ryan Tanaka AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3 GREENSPOINT, PHOENIX, ARIZONA 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 ............................................................. 16 Improvement Analysis ...................................................... 16 Highest and Best Use ...................................................... 17 VALUATION Valuation Procedure ....................................................... 18 Sales Comparison Approach ................................................. 20 Income Capitalization Approach ............................................ 26 Reconciliation and Conclusion ............................................. 37
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 GREENSPOINT, PHOENIX, ARIZONA EXECUTIVE SUMMARY PART ONE - PROPERTY DESCRIPTION PROPERTY NAME: Greenspoint LOCATION: 4202 E. Cactus Rd Phoenix, Arizona 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: May 6, 2003 DATE OF REPORT: July 14, 2003 PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS: SITE: Size: 9.25 acres, or 402,930 square feet Assessor Parcel No.: 167-27-001-W Floodplain: Community Panel No. 04013C1680G (July 19, 2001) Flood Zone AE, an area inside the floodplain. Zoning: RSPCD (Planned Community Development) BUILDING: No. of Units: 336 Units Total NRA: 278,064 Square Feet Average Unit Size: 828 Square Feet Apartment Density: 36.3 units per acre Year Built: 1985 UNIT MIX AND MARKET RENT: GROSS RENTAL INCOME PROJECTION
Market Rent Square ----------------- Monthly Annual Unit Type Feet Per Unit Per SF Income Income --------- ------ -------- ------ -------- ------ 1B/1BA 653 $620 $0.95 $ 29,760 $ 357,120 1Br/1Ba 717 $612 $0.85 $ 36,720 $ 440,640 1Br/1Ba 756 $600 $0.79 $ 36,000 $ 432,000 2Br/1.3 Ba 884 $664 $0.75 $ 55,776 $ 669,312 2Br/2Ba 1,001 $700 $0.70 $ 58,800 $ 705,600 Total $217,056 $2,604,672
OCCUPANCY: 91% ECONOMIC LIFE: 45 Years EFFECTIVE AGE: 15 Years REMAINING ECONOMIC LIFE: 30 Years AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5 GREENSPOINT, PHOENIX, ARIZONA SUBJECT PHOTOGRAPHS AND LOCATION MAP: SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] EXTERIOR - ENTRANCE EXTERIOR - LANDSCAPE & PARK AREA MAP [MAP] AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6 GREENSPOINT, PHOENIX, ARIZONA 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 GREENSPOINT, PHOENIX, ARIZONA PART TWO - ECONOMIC INDICATORS INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION Amount $/Unit --------------------- ------ ------ Potential Rental Income $2,604,672 $7,752 Effective Gross Income $2,475,218 $7,367 Operating Expenses $1,072,961 $3,193 43.3% of EGI Net Operating Income: $1,318,257 $3,923 Capitalization Rate 9.00% DIRECT CAPITALIZATION VALUE $14,300,000 * $42,560 / UNIT DISCOUNTED CASH FLOW ANALYSIS: Holding Period 10 years 2002 Economic Vacancy 17% Stabilized Vacancy & Collection Loss: 14% Lease-up / Stabilization Period N/A Terminal Capitalization Rate 9.50% Discount Rate 12.00% Selling Costs 2.00% Growth Rates: Income 3.00% Expenses: 3.00% DISCOUNTED CASH FLOW VALUE $14,400,000 * $42,857 / UNIT RECONCILED INCOME CAPITALIZATION VALUE $14,400,000 $42,857 / UNIT
SALES COMPARISON APPROACH PRICE PER UNIT: Range of Sales $/Unit (Unadjusted) $29,885 to $71,898 Range of Sales $/Unit (Adjusted) $42,158 to $46,734 VALUE INDICATION - PRICE PER UNIT $14,500,000 * $43,155 / UNIT EGIM ANALYSIS Range of EGIMs from Improved Sales 6.73 to 7.47 Selected EGIM for Subject 6.00 Subject's Projected EGI $2,475,218 EGIM ANALYSIS CONCLUSION $14,600,000 * $43,452 / UNIT NOI PER UNIT ANALYSIS CONCLUSION $14,800,000 * $44,048 / UNIT RECONCILED SALES COMPARISON VALUE $14,600,000 $43,452 / 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 GREENSPOINT, PHOENIX, ARIZONA PART THREE - SUMMARY OF VALUE CONCLUSIONS SALES COMPARISON APPROACH: Price Per Unit $14,500,000 NOI Per Unit $14,800,000 EGIM Multiplier $14,600,000 INDICATED VALUE BY SALES COMPARISON $14,600,000 $43,452 / UNIT INCOME APPROACH: Direct Capitalization Method: $14,300,000 Discounted Cash Flow Method: $14,400,000 INDICATED VALUE BY THE INCOME APPROACH $14,400,000 $42,857 / UNIT RECONCILED OVERALL VALUE CONCLUSION: $14,500,000 $43,155 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9 GREENSPOINT, PHOENIX, ARIZONA INTRODUCTION IDENTIFICATION OF THE SUBJECT The subject property is located at 4202 E. Cactus Rd, Phoenix, Maricopa County, Arizona. Phoenix identifies it as 167-27-001-W. SCOPE OF THE ASSIGNMENT The property, neighborhood, and comparables were inspected by Ryan Tanaka on May 6, 2003. Douglas Needham, MAI has not made a personal inspection of the subject property. Ryan Tanaka performed the research, valuation analysis and wrote the report. Douglas Needham, MAI reviewed the report and concurs with the value. Douglas Needham, MAI and Ryan Tanaka have extensive experience in appraising similar properties and meet 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 May 6, 2003. The date of the report is July 14, 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 AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10 GREENSPOINT, PHOENIX, ARIZONA defined in The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 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 Century Properties Fund XIX. 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. The subject is currently not offered for sale. AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 11 GREENSPOINT, PHOENIX, ARIZONA 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 Phoenix, Arizona. Overall, the neighborhood is characterized as a suburban setting with the predominant land use being multi family residential. The subject's neighborhood is generally defined by the following boundaries. NEIGHBORHOOD BOUNDARIES East - N. 56th Street West - Highway 51 South - E. Cannon Dr North - E. Sharon Dr MAJOR EMPLOYERS Major employers in the subject's area include Wells Fargo, Intel, State of Arizona, Wal-Mart Stores Inc, Motorola Inc, Bank One Corp, Walgreen Co, Target Corp, American Express Co, and Honeywell International Inc. 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 GREENSPOINT, PHOENIX, ARIZONA NEIGHBORHOOD DEMOGRAPHICS
AREA ---------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA ---------------------------------------------------------------------------------- POPULATION TRENDS Current Population 16,298 103,031 242,155 3,441,350 5-Year Population 16,728 107,576 267,267 3,928,765 % Change CY-5Y 2.6% 4.4% 10.4% 14.2% Annual Change CY-5Y 0.5% 0.9% 2.1% 2.8% HOUSEHOLDS Current Households 7,338 39,289 95,855 1,259,651 5-Year Projected Households 7,573 41,176 105,920 1,426,007 % Change CY - 5Y 3.2% 4.8% 10.5% 13.2% Annual Change CY-5Y 0.6% 1.0% 2.1% 2.6% INCOME TRENDS Median Household Income $ 48,054 $ 62,803 $ 60,340 $ 44,128 Per Capita Income $ 26,623 $ 30,318 $ 32,524 $ 22,676 Average Household Income $ 59,547 $ 79,376 $ 82,316 $ 61,951
Source: Demographics Now The subject neighborhood's population is expected to show increases below that of the region. The immediate market offers superior 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 38.61% 24.64% 26.69% 27.76% 5-Year Projected % Renting 36.82% 23.86% 26.02% 26.96% % of Households Owning 51.58% 67.94% 65.55% 60.59% 5-Year Projected % Owning 52.99% 68.64% 66.52% 62.26%
Source: Demographics Now AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13 GREENSPOINT, PHOENIX, ARIZONA SURROUNDING IMPROVEMENTS The following uses surround the subject property: North - Parking Lot South - Apartment Complexes, Residential Units East - Golf Course West - Apartment Communities CONCLUSIONS The subject is well located within the city of Phoenix. 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 GREENSPOINT, PHOENIX, ARIZONA MARKET ANALYSIS The subject property is located in the city of Phoenix in Maricopa County. The overall pace of development in the subject's market is more or less decreasing. A Retail center with tenants such as 24-hour Fitness, Wildoats, Albertsons, and Fry's Electronics is being built. The following table illustrates historical vacancy rates for the subject's market. HISTORICAL VACANCY RATE
Period Region Submarket ----------------------------- 1997 5.8% N/A 1998 6.3% N/A 1999 7.3% N/A 2000 6.9% N/A 2001 8.6% 8.2% 2002 10.5% 8.0% 2003 11.0% N/A
Occupancy trends in the subject's market are decreasing. Historically speaking, the subject's submarket has outperformed the overall market. The submarket occupancy outperforms the regions occupancy. 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 ----------------------------------------------------- 1997 $598 - N/A - 1998 $626 4.7% N/A N/A 1999 $650 3.8% N/A N/A 2000 $676 4.0% N/A N/A 2001 $686 1.5% $854 - 2002 $691 0.7% $863 1.1% 2003 $694 0.4% N/A N/A
The following table illustrates a summary of the subject's competitive set. AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15 GREENSPOINT, PHOENIX, ARIZONA COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject ---------------------------------------------------------------------------------------------- R-1 Townhomes on the Park 120 N/A 1985 .3 miles away from subject R-2 The Palisades 536 93% 1990 .7 miles away from subject R-3 Summit 206 85% 1978 .3 miles from subject R-4 Villa Encanto 383 96% 1985 Within 1 mile away Subject Greenspoint 336 91% 1985
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16 GREENSPOINT, PHOENIX, ARIZONA PROPERTY DESCRIPTION SITE ANALYSIS Site Area 9.25 acres, or 402,930 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 04013C1680G, dated July 19, 2001 Flood Zone Zone AE Zoning RSPCD, the subject improvements represent a legal conforming use of the site. REAL ESTATE TAXES
ASSESSED VALUE - 2002 ---------------------------------------- TAX RATE / PROPERTY PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES ----------------------------------------------------------------------------------- 167-27-001-W $1,612,764 $10,319,736 $11,932,500 0.01233 $147,091
IMPROVEMENT ANALYSIS Year Built 1985 Number of Units 336 Net Rentable Area 278,064 Square Feet Construction: Foundation Concrete block wall Frame Heavy or light wood Exterior Walls Stucco wall Roof Concrete, clay or ceramic tile over a wood truss structure Project Amenities Amenities at the subject include a swimming pool, spa/jacuzzi, gym room, barbeque equipment, meeting hall, business office, and secured parking. Unit Amenities Individual unit amenities include a balcony, fireplace, cable TV connection, and washer dryer connection. Appliances available in each unit include a refrigerator, stove, microwave dishwasher, garbage disposal, washer/dryer, and oven. AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17 GREENSPOINT, PHOENIX, ARIZONA Unit Mix:
Unit Area Unit Type Number of Units (Sq. Ft.) ------------------------------------------ 1B/1BA 48 653 1Br/1Ba 60 717 1Br/1Ba 60 756 2Br/1.3Ba 84 884 2Br/2Ba 84 1,001
Overall Condition Good Effective Age 15 years Economic Life 45 years Remaining Economic Life 30 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 1985 and consist of a 336-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 18 GREENSPOINT, PHOENIX, ARIZONA 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 19 GREENSPOINT, PHOENIX, ARIZONA 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 20 GREENSPOINT, PHOENIX, ARIZONA 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 21 GREENSPOINT, PHOENIX, ARIZONA SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 ----------------------------------------------------------------------------------------------------------------- Property Name Greenspoint Avalon Hills Montevida LOCATION: Address 4202 E. Cactus Rd 3535 W. Tierra Buena Ln 7101 N 19th Ave City, State Phoenix, Arizona Phoenix, AZ Phoenix, AZ County Maricopa Maricopa Maricopa PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 278,064 244,376 225,194 Year Built 1985 1985 1999 Number of Units 336 348 276 Unit Mix: Type Total Type Total Type Total 1B/1BA 48 1BD 140 1BD 156 1Br/1Ba 60 2BD 208 2BD 90 1Br/1Ba 60 3BD 30 2Br/1.3 Ba 84 2Br/2Ba 84 Average Unit Size (SF) 828 702 816 Land Area (Acre) 9.2500 13.5100 6.5500 Density (Units/Acre) 36.3 25.8 42.1 Parking Ratio (Spaces/Unit) 1.49 1.20 1.81 Parking Type (Gr., Cov., etc.) Garage, Open Covered 0 0 CONDITION: Good Good Very Good APPEAL: Good Good Very Good AMENITIES: Pool/Spa Yes/Yes Gym Room Yes Laundry Room No Secured Parking Yes Sport Courts Yes Washer/Dryer Connection Yes OCCUPANCY: 91% 0% 0% TRANSACTION DATA: Sale Date April, 2002 June, 2002 Sale Price ($) $10,400,000 $19,500,000 Grantor Del Cano Canterbury Hills (LP) Montevida (LLC) Grantee Arizona West Tierra (LP) Montevida Properties, Inc Sale Documentation N/A N/A Verification N/A N/A Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income N/A $2,853,168 $10,338 $12.67 Vacancy/Credit Loss N/A $ 242,519 $ 879 $ 1.08 Effective Gross Income N/A $2,610,649 $ 9,459 $11.59 Operating Expenses N/A $ 849,528 $ 3,078 $ 3.77 Net Operating Income $1,040,000 $2,989 $4.26 $1,774,443 $ 6,429 $ 7.88 NOTES: None None PRICE PER UNIT $29,885 $70,652 PRICE PER SQUARE FOOT $ 42.56 $ 86.59 EXPENSE RATIO N/A 32.5% EGIM N/A 7.47 OVERALL CAP RATE 10.00% 9.10% Cap Rate based on Pro Forma or Actual Income? ACTUAL PRO FORMA COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 -------------------------------------------------------------------------------------------------------------------- Property Name Las Brisas The Ridge Paradise Falls Apt LOCATION: Address 8011 N 7th St 15202 N 40th St 15611 N 31st St City, State Phoenix, AZ Phoenix, AZ Phoenix County Maricopa Maricopa Maricopa PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 278,272 278,424 171,845 Year Built 1992 1986 1986 Number of Units 274 380 220 Unit Mix: Type Total Type Total Type Total 1BD 62 Studio 44 1BD 108 2BD 170 1BD 168 2BD 112 3BD 42 2BD 168 Average Unit Size (SF) 1,016 733 781 Land Area (Acre) 16.3900 13.1100 7.7600 Density (Units/Acre) 16.7 29.0 28.4 Parking Ratio (Spaces/Unit) 1.60 1.40 1.30 Parking Type (Gr., Cov., etc.) 0 0 0 CONDITION: Very Good Good Excellent APPEAL: Very Good Good Excellent AMENITIES: Pool/Spa Gym Room Laundry Room Secured Parking Sport Courts Washer/Dryer Connection OCCUPANCY: 0% 0% 0% TRANSACTION DATA: Sale Date December, 2002 December, 2002 February, 2003 Sale Price ($) $19,700,000 $17,800,000 $9,800,000 Grantor LBA Phoenix (LLC) Archstone-Smith Operating Trust SWP Properties I Grantee Olympic Las Brisas (LLC) Paradise Falls (LLC) Sale Documentation N/A N/A N/A Verification N/A N/A N/A Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income N/A N/A $1,700,000 $7,727 $9.89 Vacancy/Credit Loss N/A N/A $ 244,800 $1,113 $1.42 Effective Gross Income N/A N/A $1,455,200 $6,615 $8.47 Operating Expenses N/A N/A $ 660,000 $3,000 $3.84 Net Operating Income $1,418,400 $5,177 $5.10 $1,379,500 $3,630 $4.95 $ 795,200 $3,615 $4.63 NOTES: None PRICE PER UNIT $71,898 $46,842 $44,545 PRICE PER SQUARE FOOT $ 70.79 $ 63.93 $ 57.03 EXPENSE RATIO N/A N/A 45.4% EGIM N/A N/A 6.73 OVERALL CAP RATE 7.20% 7.75% 8.11% Cap Rate based on Pro Forma or Actual Income? PRO FORMA ACTUAL
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22 GREENSPOINT, PHOENIX, ARIZONA IMPROVED SALES MAP [MAP] IMPROVED SALES ANALYSIS The improved sales indicate a sales price range from $29,885 to $71,898 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 $42,158 to $46,734 per unit with a mean or average adjusted price of $44,392 per unit. The median adjusted price is $44,828 per unit. Based on the following analysis, we have concluded to a value of $44,000 per unit, which results in an "as is" value of $14,500,000 (rounded after necessary adjustment, if any). AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23 GREENSPOINT, PHOENIX, ARIZONA SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 I - 3 --------------------------------------------------------------------------------------------------------------------------------- Property Name Greenspoint Avalon Hills Montevida Las Brisas Address 4202 E. Cactus Rd 3535 W. Tierra Buena Ln 7101 N 19th Ave 8011 N 7th St City Phoenix, Arizona Phoenix, AZ Phoenix, AZ Phoenix, AZ Sale Date April, 2002 June, 2002 December, 2002 Sale Price ($) $10,400,000 $19,500,000 $19,700,000 Net Rentable Area (SF) 278,064 244,376 225,194 278,272 Number of Units 336 348 276 274 Price Per Unit $29,885 $70,652 $71,898 Year Built 1985 1985 1999 1992 Land Area (Acre) 9.2500 13.5100 6.5500 16.3900 VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0% Date of Sale (Time) 04-2002 0% June, 2002 0% 12-2002 0% VALUE AFTER TRANS. ADJUST. ($/UNIT) $29,885 $70,652 $71,898 Location Inferior 15% Superior -15% Superior -15% Number of Units 336 348 0% 276 -5% 274 -5% Quality / Appeal Good Inferior 20% Superior -15% Superior -10% Age / Condition 1985 1985 / Good 5% 1999 / Very Good 0% 1992 / Very Good 0% Occupancy at Sale 91% 0% 0% 0% Amenities Good Inferior 10% Comparable 0% Comparable 0% Average Unit Size (SF) 828 702 0% 816 0% 1,016 -5% PHYSICAL ADJUSTMENT 50% -35% -35% FINAL ADJUSTED VALUE ($/UNIT) $44,828 $45,924 $46,734 COMPARABLE COMPARABLE DESCRIPTION I - 4 I - 5 ------------------------------------------------------------------------------------- Property Name The Ridge Paradise Falls Apt Address 15202 N 40th St 15611 N 31st St City Phoenix, AZ Phoenix Sale Date December, 2002 February, 2003 Sale Price ($) $17,800,000 $9,800,000 Net Rentable Area (SF) 278,424 171,845 Number of Units 380 220 Price Per Unit $46,842 $44,545 Year Built 1986 1986 Land Area (Acre) 13.1100 7.7600 VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Date of Sale (Time) December, 2002 0% 02-2003 0% VALUE AFTER TRANS. ADJUST. ($/UNIT) $46,842 $44,545 Location Comparable 0% Superior -5% Number of Units 380 0% 220 -10% Quality / Appeal Inferior 10% Inferior 10% Age / Condition 1986 / Good 0% 1986 / Excellent 0% Occupancy at Sale 0% 10% Amenities Superior -20% Superior -10% Average Unit Size (SF) 733 0% 781 0% PHYSICAL ADJUSTMENT -10% -5% FINAL ADJUSTED VALUE ($/UNIT) $42,158 $ 42,318
SUMMARY VALUE RANGE (PER UNIT) $42,158 TO $46,734 MEAN (PER UNIT) $44,392 MEDIAN (PER UNIT) $44,828 VALUE CONCLUSION (PER UNIT) $44,000
VALUE OF IMPROVEMENT & MAIN SITE $14,784,000 PV OF CONCESSIONS -$ 299,000 VALUE INDICATED BY SALES COMPARISON APPROACH $14,485,000 ROUNDED $14,500,000
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 24 GREENSPOINT, PHOENIX, ARIZONA 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-1 348 $10,400,000 10.00% $1,040,000 $1,318,257 1.313 $39,234 $ 29,885 $ 2,989 $ 3,923 I-2 276 $19,500,000 9.10% $1,774,443 $1,318,257 0.610 $43,115 $ 70,652 $ 6,429 $ 3,923 I-3 274 $19,700,000 7.20% $1,418,400 $1,318,257 0.758 $54,491 $ 71,898 $ 5,177 $ 3,923 I-4 380 $17,800,000 7.75% $1,379,500 $1,318,257 1.081 $50,624 $ 46,842 $ 3,630 $ 3,923 I-5 220 $ 9,800,000 8.11% $ 795,200 $1,318,257 1.085 $48,352 $ 44,545 $ 3,615 $ 3,923
PRICE/UNIT
Low High Average Median ------- ------- ------- ------ $39,234 $54,491 $47,163 $48,352
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT Estimated Price Per Unit $ 45,000 ------------ Number of Units 336 Value $15,120,000 PV of Concessions -$ 299,000 ------------ Value Based on NOI Analysis $14,821,000 Rounded $14,800,000
The adjusted sales indicate a range of value between $39,234 and $54,491 per unit, with an average of $47,163 per unit. Based on the subject's competitive position within the improved sales, a value of $45,000 per unit is estimated. This indicates an "as is" market value of $14,800,000 (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. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 25 GREENSPOINT, PHOENIX, ARIZONA 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-1 348 $10,400,000 N/A N/A N/A N/A $ 29,885 I-2 276 $19,500,000 $2,610,649 $849,528 32.54% 7.47 $ 70,652 I-3 274 $19,700,000 N/A N/A N/A N/A 43.35% $ 71,898 I-4 380 $17,800,000 N/A N/A N/A N/A $ 46,842 I-5 220 $ 9,800,000 $1,455,200 $660,000 45.35% 6.73 $ 44,545
EGIM
Low High Average Median --- ---- ------- ------ 6.73 7.47 7.10 7.10
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES Estimate EGIM 6.00 ------------ Subject EGI $ 2,475,218 Value $14,851,308 PV of Concessions -$ 299,000 ------------ Value Based on EGIM Analysis $14,552,308 Rounded $14,600,000 Value Per Unit $ 43,452
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 43.35% before reserves. The comparable sales indicate a range of expense ratios from 32.54% to 45.35%, while their EGIMs range from 6.73 to 7.47. Overall, we conclude to an EGIM of 6.00, which results in an "as is" value estimate in the EGIM Analysis of $14,600,000. 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 $14,600,000. Price Per Unit $14,500,000 NOI Per Unit $14,800,000 EGIM Analysis $14,600,000 Sales Comparison Conclusion $14,600,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26 GREENSPOINT, PHOENIX, ARIZONA 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 27 GREENSPOINT, PHOENIX, ARIZONA 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 ---------------------------------------------------- 1B/1BA 653 $601 $0.92 93.8% 1Br/1Ba 717 $612 $0.85 86.7% 1Br/1Ba 756 $553 $0.73 91.7% 2Br/1.3Ba 884 $664 $0.75 91.7% 2Br/2Ba 1001 $690 $0.69 92.9%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28 GREENSPOINT, PHOENIX, ARIZONA RENT ANALYSIS
COMPARABLE RENTS -------------------------------------- R-1 R-2 R-3 R-4 -------------------------------------- Townhomes The Villa on the Park Palisades Summit Encanto -------------------------------------- COMPARISON TO SUBJECT SUBJECT SUBJECT -------------------------------------- SUBJECT UNIT ACTUAL ASKING Slightly Slightly DESCRIPTION TYPE RENT RENT Superior Superior Similar Inferior MIN MAX MEDIAN AVERAGE ------------------------------------------------------------------------------------------------------------------------ Monthly Rent 1B/1BA $ 601 $ 609 $ 630 $ 660 $ 500 $ 519 $ 500 $ 660 $ 575 $ 577 Unit Area (SF) 653 653 670 669 375 448 375 670 559 541 Monthly Rent Per Sq. Ft. $ 0.92 $ 0.93 $0.94 $ 0.99 $1.33 $1.16 $0.94 $ 1.33 $1.07 $1.10 Monthly Rent 1BR/1BA $ 612 $ 669 $ 690 $ 690 $ 520 $ 559 $ 520 $ 690 $ 625 $ 615 Unit Area (SF) 717 717 809 783 440 560 440 809 672 648 Monthly Rent Per Sq. Ft. $ 0.85 $ 0.93 $0.85 $ 0.88 $1.18 $1.00 $0.85 $ 1.18 $0.94 $0.98 Monthly Rent 1BR/1BA $ 553 $ 699 $ 630 $ 745 $ 555 $ 579 $ 555 $ 745 $ 605 $ 627 Unit Area (SF) 756 756 670 829 540 604 540 829 637 661 Monthly Rent Per Sq. Ft. $ 0.73 $ 0.92 $0.94 $ 0.90 $1.03 $0.96 $0.90 $ 1.03 $0.95 $0.96 Monthly Rent 2BR/1.3 BA $ 664 $ 729 $ 821 $ 685 $ 599 $ 599 $ 821 $ 685 $ 702 Unit Area (SF) 884 884 995 750 682 682 995 750 809 Monthly Rent Per Sq. Ft. $ 0.75 $ 0.82 $ 0.83 $0.91 $0.88 $0.83 $ 0.91 $0.88 $0.87 Monthly Rent 2BR/2BA $ 690 $ 789 $ 845 $ 720 $ 619 $ 619 $ 845 $ 720 $ 728 Unit Area (SF) 1,001 1,001 1,102 861 748 748 1,102 861 904 Monthly Rent Per Sq. Ft. $ 0.69 $ 0.79 $ 0.77 $0.84 $0.83 $0.77 $ 0.84 $0.83 $0.81
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 ------------------------------------------------------------------------------ 1B/1BA 48 653 $620 $0.95 $ 29,760 $ 357,120 1Br/1Ba 60 717 $612 $0.85 $ 36,720 $ 440,640 1Br/1Ba 60 756 $600 $0.79 $ 36,000 $ 432,000 2Br/1.3 Ba 84 884 $664 $0.75 $ 55,776 $ 669,312 2Br/2Ba 84 1,001 $700 $0.70 $ 58,800 $ 705,600 Total $217,056 $2,604,672
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 on the following page. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29 GREENSPOINT, PHOENIX, ARIZONA 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 $2,782,578 $8,281 $2,797,248 $8,325 $2,729,481 $8,123 $2,664,000 $7,929 Vacancy $ 161,303 $ 480 $ 170,421 $ 507 $ 262,654 $ 782 $ 247,500 $ 737 Credit Loss/Concessions $ 194,118 $ 578 $ 177,930 $ 530 $ 191,436 $ 570 $ 117,500 $ 350 ---------------------------------------------------------------------------------------- Subtotal $ 355,421 $1,058 $ 348,351 $1,037 $ 454,090 $1,351 $ 365,000 $1,086 Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 18,000 $ 54 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 130,369 $ 388 $ 186,968 $ 556 $ 255,406 $ 760 $ 148,100 $ 441 ---------------------------------------------------------------------------------------- Subtotal Other Income $ 130,369 $ 388 $ 186,968 $ 556 $ 255,406 $ 760 $ 166,100 $ 494 Effective Gross Income $2,557,526 $7,612 $2,635,865 $7,845 $2,530,797 $7,532 $2,465,100 $7,337 Operating Expenses Taxes $ 147,445 $ 439 $ 165,000 $ 491 $ 131,927 $ 393 $ 161,992 $ 482 Insurance $ 29,293 $ 87 $ 43,847 $ 130 $ 49,600 $ 148 $ 55,469 $ 165 Utilities $ 158,654 $ 472 $ 178,766 $ 532 $ 184,895 $ 550 $ 180,000 $ 536 Repair & Maintenance $ 30,593 $ 91 $ 56,539 $ 168 $ 61,363 $ 183 $ 42,000 $ 125 Cleaning $ 51,454 $ 153 $ 77,599 $ 231 $ 76,230 $ 227 $ 72,000 $ 214 Landscaping $ 25,381 $ 76 $ 33,725 $ 100 $ 22,251 $ 66 $ 84,000 $ 250 Security $ 22,109 $ 66 $ 14,174 $ 42 $ 16,148 $ 48 $ 0 $ 0 Marketing & Leasing $ 43,470 $ 129 $ 56,576 $ 168 $ 63,106 $ 188 $ 60,000 $ 179 General Administrative $ 280,362 $ 834 $ 270,619 $ 805 $ 452,245 $1,346 $ 323,676 $ 963 Management $ 135,021 $ 402 $ 146,301 $ 435 $ 125,521 $ 374 $ 141,691 $ 422 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------------------------------------------------------------------------------------- Total Operating Expenses $ 923,782 $2,749 $1,043,146 $3,105 $1,183,286 $3,522 $1,120,828 $3,336 Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ---------------------------------------------------------------------------------------- Net Income $1,633,744 $4,862 $1,592,719 $4,740 $1,347,511 $4,010 $1,344,272 $4,001
Annualized 2003 --------------------- PROJECTION AAA PROJECTION ---------------------------------------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT % ------------------------------------------------------------------------------- Revenues Rental Income $2,617,928 $7,791 $2,604,672 $7,752 100.0% Vacancy $ 255,532 $ 761 $ 260,467 $ 775 10.0% Credit Loss/Concessions $ 120,136 $ 358 $ 104,187 $ 310 4.0% --------------------------------------------------- Subtotal $ 375,668 $1,118 $ 364,654 $1,085 14.0% Laundry Income $ 0 $ 0 $ 0 $ 0 0.0% Garage Revenue $ 0 $ 0 $ 0 $ 0 0.0% Other Misc. Revenue $ 211,788 $ 630 $ 235,200 $ 700 9.0% --------------------------------------------------- Subtotal Other Income $ 211,788 $ 630 $ 235,200 $ 700 9.0% Effective Gross Income $2,454,048 $7,304 $2,475,218 $7,367 100.0% Operating Expenses Taxes $ 162,956 $ 485 $ 157,920 $ 470 6.4% Insurance $ 52,996 $ 158 $ 52,080 $ 155 2.1% Utilities $ 170,392 $ 507 $ 184,800 $ 550 7.5% Repair & Maintenance $ 70,232 $ 209 $ 63,840 $ 190 2.6% Cleaning $ 41,736 $ 124 $ 75,600 $ 225 3.1% Landscaping $ 37,752 $ 112 $ 40,320 $ 120 1.6% Security $ 25,920 $ 77 $ 18,480 $ 55 0.7% Marketing & Leasing $ 83,472 $ 248 $ 53,760 $ 160 2.2% General Administrative $ 364,044 $1,083 $ 302,400 $ 900 12.2% Management $ 118,388 $ 352 $ 123,761 $ 368 5.0% Miscellaneous $ 0 $ 0 $ 0 $ 0 0.0% --------------------------------------------------- Total Operating Expenses $1,127,888 $3,357 $1,072,961 $3,193 43.3% Reserves $ 0 $ 0 $ 84,000 $ 250 7.8% --------------------------------------------------- Net Income $1,326,160 $3,947 $1,318,257 $3,923 53.3%
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 14% based on the subject's historical performance, as well as the anticipated future market conditions. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30 GREENSPOINT, PHOENIX, ARIZONA 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 $250 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 $250 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 1ST QUARTER 2003 NATIONAL APARTMENT MARKET
CAPITALIZATION RATES ------------------------------------------- GOING-IN TERMINAL ------------------------------------------- LOW HIGH LOW HIGH ------------------------------------------- RANGE 6.00% 10.00% 7.00% 10.00% AVERAGE 8.14% 8.47%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31 GREENSPOINT, PHOENIX, ARIZONA SUMMARY OF OVERALL CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR --------------------------------------------------------- I-1 Apr-02 0% $29,885 10.00% I-2 June, 2002 0% $70,652 9.10% I-3 Dec-02 0% $71,898 7.20% I-4 December, 2002 0% $46,842 7.75% I-5 Feb-03 0% $44,545 8.11% High 10.00% Low 7.20% Average 8.43%
Based on this information, we have concluded the subject's overall capitalization rate should be 9.00%. 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 9.50%. 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 $14,400,000. In this instance, the reversion figure contributes AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32 GREENSPOINT, PHOENIX, ARIZONA approximately 41% of the total value. Investors surveyed for this assignment indicated they 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 on the following pages. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33 GREENSPOINT, PHOENIX, ARIZONA DISCOUNTED CASH FLOW ANALYSIS
GREENSPOINT ------------------------------------------------------------------------------------------------------------------------------- YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009 APR-2010 FISCAL YEAR 1 2 3 4 5 6 7 ------------------------------------------------------------------------------------------------------------------------------- REVENUE Base Rent $2,604,672 $2,682,812 $2,763,297 $2,846,195 $2,931,581 $3,019,529 $3,110,115 Vacancy $ 260,467 $ 268,281 $ 276,330 $ 284,620 $ 293,158 $ 301,953 $ 311,011 Credit Loss $ 104,187 $ 107,312 $ 110,532 $ 113,848 $ 117,263 $ 120,781 $ 124,405 Concessions $ 173,645 $ 111,784 $ 55,266 $ 23,718 $ 0 $ 0 $ 0 Subtotal $ 538,299 $ 487,378 $ 442,127 $ 422,186 $ 410,421 $ 422,734 $ 435,416 Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 235,200 $ 242,256 $ 249,524 $ 257,009 $ 264,720 $ 272,661 $ 280,841 Subtotal Other Income $ 235,200 $ 242,256 $ 249,524 $ 257,009 $ 264,720 $ 272,661 $ 280,841 EFFECTIVE GROSS INCOME $2,301,573 $2,437,691 $2,570,693 $2,681,019 $2,785,880 $2,869,456 $2,955,540 OPERATING EXPENSES: Taxes $ 157,920 $ 162,658 $ 167,537 $ 172,563 $ 177,740 $ 183,073 $ 188,565 Insurance $ 52,080 $ 53,642 $ 55,252 $ 56,909 $ 58,616 $ 60,375 $ 62,186 Utilities $ 184,800 $ 190,344 $ 196,054 $ 201,936 $ 207,994 $ 214,234 $ 220,661 Repair & Maintenance $ 63,840 $ 65,755 $ 67,728 $ 69,760 $ 71,852 $ 74,008 $ 76,228 Cleaning $ 75,600 $ 77,868 $ 80,204 $ 82,610 $ 85,088 $ 87,641 $ 90,270 Landscaping $ 40,320 $ 41,530 $ 42,775 $ 44,059 $ 45,381 $ 46,742 $ 48,144 Security $ 18,480 $ 19,034 $ 19,605 $ 20,194 $ 20,799 $ 21,423 $ 22,066 Marketing & Leasing $ 53,760 $ 55,373 $ 57,034 $ 58,745 $ 60,507 $ 62,323 $ 64,192 General Administrative $ 302,400 $ 311,472 $ 320,816 $ 330,441 $ 340,354 $ 350,564 $ 361,081 Management $ 115,079 $ 121,885 $ 128,535 $ 134,051 $ 139,294 $ 143,473 $ 147,777 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 TOTAL OPERATING EXPENSES $1,064,279 $1,099,561 $1,135,541 $1,171,267 $1,207,627 $1,243,856 $1,281,171 Reserves $ 84,000 $ 86,520 $ 89,116 $ 91,789 $ 94,543 $ 97,379 $ 100,300 NET OPERATING INCOME $1,153,294 $1,251,610 $1,346,036 $1,417,963 $1,483,710 $1,528,221 $1,574,068 Operating Expense Ratio (% of EGI) 46.2% 45.1% 44.2% 43.7% 43.3% 43.3% 43.3% Operating Expense Per Unit $ 3,167 $ 3,273 $ 3,380 $ 3,486 $ 3,594 $ 3,702 $ 3,813
GREENSPOINT ---------------------------------------------------------------------------------------- YEAR APR-2011 APR-2012 APR-2013 APR-2014 FISCAL YEAR 8 9 10 11 ---------------------------------------------------------------------------------------- REVENUE Base Rent $3,203,418 $3,299,521 $3,398,506 $3,500,461 Vacancy $ 320,342 $ 329,952 $ 339,851 $ 350,046 Credit Loss $ 128,137 $ 131,981 $ 135,940 $ 140,018 Concessions $ 0 $ 0 $ 0 $ 0 Subtotal $ 448,479 $ 461,933 $ 475,791 $ 490,065 Laundry Income $ 0 $ 0 $ 0 $ 0 Garage Revenue $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 289,266 $ 297,944 $ 306,883 $ 316,089 Subtotal Other Income $ 289,266 $ 297,944 $ 306,883 $ 316,089 EFFECTIVE GROSS INCOME $3,044,206 $3,135,532 $3,229,598 $3,326,486 OPERATING EXPENSES: Taxes $ 194,222 $ 200,048 $ 206,050 $ 212,231 Insurance $ 64,052 $ 65,973 $ 67,953 $ 69,991 Utilities $ 227,281 $ 234,099 $ 241,122 $ 248,356 Repair & Maintenance $ 78,515 $ 80,871 $ 83,297 $ 85,796 Cleaning $ 92,978 $ 95,768 $ 98,641 $ 101,600 Landscaping $ 49,589 $ 51,076 $ 52,608 $ 54,187 Security $ 22,728 $ 23,410 $ 24,112 $ 24,836 Marketing & Leasing $ 66,118 $ 68,102 $ 70,145 $ 72,249 General Administrative $ 371,914 $ 383,071 $ 394,563 $ 406,400 Management $ 152,210 $ 156,777 $ 161,480 $ 166,324 Miscellaneous $ 0 $ 0 $ 0 $ 0 TOTAL OPERATING EXPENSES $1,319,607 $1,359,195 $1,399,971 $1,441,970 Reserves $ 103,309 $ 106,409 $ 109,601 $ 112,889 NET OPERATING INCOME $1,621,290 $1,669,929 $1,720,026 $1,771,627 Operating Expense Ratio (% of EGI) 43.3% 43.3% 43.3% 43.3% Operating Expense Per Unit $ 3,927 $ 4,045 $ 4,167 $ 4,292
Estimated Stabilized NOI $1,318,257 Sales Expense Rate 2.00% Months to Stabilized 1 Discount Rate 12.00% Stabilized Occupancy 90.0% Terminal Cap Rate 9.50%
Gross Residual Sale Price $18,648,707 Deferred Maintenance $ 0 Less: Sales Expense $ 372,974 Add: Excess Land $ 0 ----------- Net Residual Sale Price $18,275,733 Other Adjustments $ 0 ----------- PV of Reversion $ 5,884,297 Value Indicated By Add: NPV of NOI $ 8,535,003 "DCF" $14,419,300 ----------- PV Total $14,419,300 Rounded $14,400,000
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE ----------------------------------------------------------------------- TOTAL VALUE 11.50% 11.75% 12.00% 12.25% 12.50% ------------------------------------------------------------------------------------------ 9.00% $15,235,638 $14,988,244 $14,746,206 $14,509,389 $14,277,663 9.25% $15,060,087 $14,816,581 $14,578,335 $14,345,220 $14,117,106 TERMINAL CAP RATE 9.50% $14,893,774 $14,653,952 $14,419,300 $14,189,692 $13,965,000 9.75% $14,735,991 $14,499,663 $14,268,421 $14,042,139 $13,820,694 10.00% $14,586,096 $14,353,088 $14,125,085 $13,901,964 $13,683,603
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34 GREENSPOINT, PHOENIX, ARIZONA 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 Due to softness in the market, concessions have been utilized at the subject property and within the market. Based on our discussions with the subject's property manager and those at competing properties, these concessions are expected to continue in the near term until the market returns to a stabilized level. Concessions have been included as a line item deduction within the discounted cash flow analysis. The present value of these concessions equates to $299,000 (rounded). This amount has been deducted from the Direct Capitalization analysis, as well as the Sales Comparison Approach value. 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 9.00% percent is applicable to the subject. The results of our direct capitalization analysis are as follows: AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35 GREENSPOINT, PHOENIX, ARIZONA GREENSPOINT
TOTAL PER SQ. FT. PER UNIT % OF EGI ----------------------------------------------------------------------------------------------- REVENUE Base Rent $ 2,604,672 $ 9.37 $ 7,752 Less: Vacancy & Collection Loss 14.00% $ 364,654 $ 1.31 $ 1,085 Plus: Other Income Laundry Income $ 0 $ 0.00 $ 0 0.00% Garage Revenue $ 0 $ 0.00 $ 0 0.00% Other Misc. Revenue $ 235,200 $ 0.85 $ 700 9.50% -------------------------------------------- Subtotal Other Income $ 235,200 $ 0.85 $ 700 9.50% EFFECTIVE GROSS INCOME $ 2,475,218 $ 8.90 $ 7,367 OPERATING EXPENSES: Taxes $ 157,920 $ 0.57 $ 470 6.38% Insurance $ 52,080 $ 0.19 $ 155 2.10% Utilities $ 184,800 $ 0.66 $ 550 7.47% Repair & Maintenance $ 63,840 $ 0.23 $ 190 2.58% Cleaning $ 75,600 $ 0.27 $ 225 3.05% Landscaping $ 40,320 $ 0.15 $ 120 1.63% Security $ 18,480 $ 0.07 $ 55 0.75% Marketing & Leasing $ 53,760 $ 0.19 $ 160 2.17% General Administrative $ 302,400 $ 1.09 $ 900 12.22% Management 5.00% $ 123,761 $ 0.45 $ 368 5.00% Miscellaneous $ 0 $ 0.00 $ 0 0.00% TOTAL OPERATING EXPENSES $ 1,072,961 $ 3.86 $ 3,193 43.35% Reserves $ 84,000 $ 0.30 $ 250 3.39% -------------------------------------------- NET OPERATING INCOME $ 1,318,257 $ 4.74 $ 3,923 53.26% "GOING IN" CAPITALIZATION RATE 9.00% VALUE INDICATION $14,647,300 $52.68 $43,593 PV OF CONCESSIONS ($ 299,000) "AS IS" VALUE INDICATION (DIRECT CAPITALIZATION APPROACH) $14,348,300 ROUNDED $14,300,000 $51.43 $42,560
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36 GREENSPOINT, PHOENIX, ARIZONA DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF ----------------------------------------------------------- 8.25% $15,679,873 $15,700,000 $46,726 $56.46 8.50% $15,209,906 $15,200,000 $45,238 $54.66 8.75% $14,766,795 $14,800,000 $44,048 $53.23 9.00% $14,348,300 $14,300,000 $42,560 $51.43 9.25% $13,952,427 $14,000,000 $41,667 $50.35 9.50% $13,577,390 $13,600,000 $40,476 $48.91 9.75% $13,221,585 $13,200,000 $39,286 $47.47
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD Applying the capitalization rate to our estimated NOI results in an estimated value of $14,300,000. 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 $14,400,000 Direct Capitalization Method $14,300,000
Giving consideration to the indicated values provided by both techniques, we have concluded the estimated value by the income capitalization approach to be $14,400,000. AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37 GREENSPOINT, PHOENIX, ARIZONA 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 $14,600,000 Income Approach $14,400,000 Reconciled Value $14,500,000
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 May 6, 2003 the market value of the fee simple estate in the property is: $14,500,000 AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA GREENSPOINT, PHOENIX, ARIZONA ADDENDA AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A GREENSPOINT, PHOENIX, ARIZONA EXHIBIT A SUBJECT PHOTOGRAPHS AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A GREENSPOINT, PHOENIX, ARIZONA SUBJECT PHOTOGRAPHS [EXTERIOR - ENTRANCE PICTURE] [EXTERIOR - LANDSCAPE & PARK PICTURE] [EXTERIOR - APARTMENT ROOM PICTURE] [EXTERIOR - PARKING PICTURE] [EXTERIOR - TENNIS COURT PICTURE] [EXTERIOR - COURTYARD PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A GREENSPOINT, PHOENIX, ARIZONA SUBJECT PHOTOGRAPHS [INTERIOR-WASH/DRYER PICTURE] [EXTERIOR - WALLS PICTURE] [EXTERIOR - SWIMMING POOL PICTURE] [INTERIOR - WINDOW PANE PICTURE] [INTERIOR-KITCHEN PICTURE] [EXTERIOR - OVERVIEW OF PARKING LOT/APARTMENT BUILDING PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B GREENSPOINT, PHOENIX, ARIZONA EXHIBIT B SUMMARY OF RENT COMPARABLES AND PHOTOGRAPH OF COMPARABLES AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B GREENSPOINT, PHOENIX, ARIZONA PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3 AVALON HILLS MONTEVIDA LAS BRISAS 3535 W. Tierra Buena Ln 7101 N 19th Ave 8011 N 7th St Phoenix, AZ Phoenix, AZ Phoenix, AZ [PICTURE] [PICTURE] [PICTURE] COMPARABLE I-4 COMPARABLE I-5 THE RIDGE PARADISE FALLS APT 15202 N 40th St 15611 N 31st St Phoenix, AZ Phoenix [PICTURE] [PICTURE] \ AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B GREENSPOINT, PHOENIX, ARIZONA SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE DESCRIPTION SUBJECT R - 1 ------------------------------------------------------------------------------------------------------------------------ Property Name Greenspoint Townhomes on the Park Management Company Aimco LOCATION: Address 4202 E. Cactus Rd 12844 N. Paradise Village City, State Phoenix, Arizona Phoenix, AZ County Maricopa Maricopa Proximity to Subject .3 miles away from subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 278,064 98,884 Year Built 1985 1985 Effective Age 15 10 Building Structure Type Brick & wood siding walls; tile roof Brick & wood siding walls; tile roof Parking Type (Gr., Cov., etc.) Garage, Open Covered Open, Covered Number of Units 336 120 Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo. 1 1B/1BA 653 48 $601 1 1BD/1BA 670 48 $630 2 1Br/1Ba 717 60 $612 2 1BD/1BA 809 22 $690 3 1Br/1Ba 756 60 $553 3 1BD/1BA 890 16 $715 4 2Br/1.3 Ba 884 84 $664 3 1BD/1BA 983 18 $835 5 2Br/2Ba 1,001 84 $690 3 2BD/2BA 1,062 16 $795 Average Unit Size (SF) 828 824 Unit Breakdown: Efficiency 0% 2-Bedroom 39% Efficiency 0% 2-Bedroom 28% 1-Bedroom 61% 3-Bedroom 0% 1-Bedroom 72% 3-Bedroom CONDITION: Good Good APPEAL: Good Good AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling X Balcony X Balcony X X Fireplace Fireplace X Cable TV Ready Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool X Spa/Jacuzzi Car Wash X Spa/Jacuzzi 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 X Meeting Hall Tennis Court X Secured Parking X Tennis Court Secured Parking Racquet Ball Laundry Room Racquet Ball Laundry Room Jogging Track X Business Office Jogging Track Business Office X Gym Room X Gym Room OCCUPANCY: 91% N/A LEASING DATA: Available Leasing Terms 6 to 15 Months 6,9,12 month lease Concessions 1 - 1 1/2 Months Free 1.5 free rent Pet Deposit No Pets Utilities Paid by Tenant: X Electric X Natural Gas X Electric Natural Gas X Water Trash Water Trash Confirmation Property Manager Telephone Number 602-494-0391 602-996-2750 NOTES: None COMPARISON TO SUBJECT: Slightly Superior COMPARABLE COMPARABLE DESCRIPTION R - 2 R - 3 ------------------------------------------------------------------------------------------------------------------------ Property Name The Palisades Summit Management Company LOCATION: Address 13440 N. 44th Street 12830 N. Paradise Village Parkway West City, State Phoenix, AZ Phoenix, AZ County Maricopa Maricopa Proximity to Subject .7 miles away from subject .3 miles from subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 603,480 250,000 Year Built 1990 1978 Effective Age 20 10 Building Structure Type Brick & wood siding walls; tile roof Brick & wood siding walls; tile roof Parking Type (Gr., Cov., etc.) Open, Covered Open, Covered Number of Units 536 206 Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo. 1 1BD/1BA 669 64 $660 1 Studio 375 $500 2 1BD/1BA 783 70 $690 2 Studio 440 $520 3 1BD/1BA 829 96 $745 3 1BD/1BA 540 $555 4 2 BD/1 BA 995 48 $821 4 2BD/1BA 750 $685 5 2 BD/2 BA 1,102 88 $845 5 2BD/2BA 861 $720 Average Unit Size (SF) Unit Breakdown: Efficiency 0% 2-Bedroom 25% Efficiency 0% 2-Bedroom 50% 1-Bedroom 43% 3-Bedroom 0% 1-Bedroom 37% 3-Bedroom 13% CONDITION: Excellent Average APPEAL: Excellent Average AMENITIES: Unit Amenities Attach. Garage X Vaulted Ceiling Attach. Garage X Vaulted Ceiling X Balcony X X Balcony X X Fireplace Fireplace Cable TV Ready X Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool X Spa/Jacuzzi X Car Wash X Spa/Jacuzzi Car Wash X Basketball Court X BBQ Equipment Basketball Court X BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball Meeting Hall Sand Volley Ball X 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 X Gym Room OCCUPANCY: 93% 85% LEASING DATA: Available Leasing Terms 6 to 12 Months Concessions Reduced rental rates Reduced Rates Pet Deposit $150 Utilities Paid by Tenant: X Electric Natural Gas X Electric X Natural Gas X Water X Trash X Water X Trash Confirmation Property Manager Telephone Number 602-494-1100 NOTES: None Next to mall COMPARISON TO SUBJECT: Superior Similar COMPARABLE DESCRIPTION R - 4 -------------------------------------------------------------------------------- Property Name Villa Encanto Management Company LOCATION: Address 4315 E. Thunderbird City, State Phoenix, AZ County Maricopa Proximity to Subject Within 1 mile away PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 294,683 Year Built 1985 Effective Age 15 Building Structure Type Brick & wood siding walls; tile roof Parking Type (Gr., Cov., etc.) Open, Covered Number of Units 383 Unit Mix: Type Unit Qty. Mo. 1 Studio 448 6 $519 2 1BD/1BA 560 48 $559 3 1BD/1BA 604 33 $579 4 1BD/1BA 682 47 $599 5 1BD/1BA 748 45 $619 Average Unit Size (SF) 644 Unit Breakdown: Efficiency 0% 2-Bedroom 55% 1-Bedroom 29% 3-Bedroom 16% CONDITION: Slightly Superior APPEAL: Good AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling X Balcony X Fireplace Cable TV Ready Project Amenities X Swimming Pool X Spa/Jacuzzi Car Wash Basketball Court X BBQ Equipment Volleyball Court Theater Room Sand Volley Ball Meeting Hall Tennis Court Secured Parking Racquet Ball X Laundry Room Jogging Track Business Office X Gym Room OCCUPANCY: 96% LEASING DATA: Available Leasing Terms Concessions Pet Deposit Utilities Paid by Tenant: X Electric X Natural Gas X Water Trash Confirmation Property Manager-Pat Telephone Number 602-787-4500 NOTES: None COMPARISON TO SUBJECT: Slightly Inferior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B GREENSPOINT, PHOENIX, ARIZONA PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3 TOWNHOMES ON THE PARK THE PALISADES SUMMIT 12844 N. Paradise Village 13440 N. 44th Street 12830 N. Paradise Village Phoenix, AZ Phoenix, AZ Parkway West Phoenix, AZ [PICTURE] [PICTURE] [PICTURE] COMPARABLE R-4 VILLA ENCANTO 4315 E. Thunderbird Phoenix, AZ [PICTURE] N/A AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C GREENSPOINT, PHOENIX, ARIZONA EXHIBIT C ASSUMPTIONS AND LIMITING CONDITIONS (3 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C GREENSPOINT, PHOENIX, ARIZONA 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 GREENSPOINT, PHOENIX, ARIZONA 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 GREENSPOINT, PHOENIX, ARIZONA 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 GREENSPOINT, PHOENIX, ARIZONA EXHIBIT D CERTIFICATE OF APPRAISER (1 PAGE) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D 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. Ryan Tanaka 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- Douglas Needham -------------------- Douglas Needham, MAI Managing Principal, Real Estate Group Arizona State Certified General Real Estate Appraiser #30943 AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E GREENSPOINT, PHOENIX, ARIZONA EXHIBIT E QUALIFICATIONS OF APPRAISER (2 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E GREENSPOINT, PHOENIX, ARIZONA DOUGLAS A. NEEDHAM, MAI MANAGING PRINCIPAL, REAL ESTATE ADVISORY GROUP POSITION Douglas A. Needham is a Managing Principal for the Irvine Real Estate Advisory Group of American Appraisal Associates, Inc. ("AAA"). EXPERIENCE Valuation Mr. Needham has appraised all types of major commercial real estate including apartments, hotels/motels, light and heavy industrial facilities, self-storage facilities, mobile home parks, offices, retail shopping centers, service stations, special-use properties, and vacant land. Business Mr. Needham joined AAA in 1998. Prior to joining AAA, he was a senior associate at Koeppel Tener, a senior analyst at Great Western Appraisal Group, and an associate appraiser at R. L. McLaughlin & Associates. EDUCATION Texas A&M University Bachelor of Business Administration - Finance STATE CERTIFICATIONS State of Arizona, Certified General Real Estate Appraiser, #30943 State of California, Certified General Real Estate Appraiser, #AG025443 State of Colorado, Certified General Appraiser, #CG40017035 State of Oregon, Certified General Appraiser, #C000686 State of Washington, Certified General Real Estate #1101111 PROFESSIONAL Appraisal Institute, MAI Designated Member AFFILIATIONS
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E GREENSPOINT, PHOENIX, ARIZONA VALUATION AND Appraisal Institute SPECIAL COURSES Advanced Income Capitalization Appraisal Principles Appraisal Procedures Basic Income Capitalization Standards of Professional Practice
AMERICAN APPRAISAL ASSOCIATES, INC. GREENSPOINT, PHOENIX, ARIZONA GENERAL SERVICE CONDITIONS AMERICAN APPRAISAL ASSOCIATES, INC. GREENSPOINT, PHOENIX, ARIZONA 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.