exv99w1

March 30, 2011

Mr. Trent Johnson
Vice President
Concap Equities, Inc.
4582 S. Ulster St., Suite 1100
Denver, CO 80237


Re:		Appraisal of Arbours of Hermitage Apartments 6001 Old Hickory Boulevard Nashville, Tennessee 37076

Dear Mr. Johnson:

Cogent Realty Advisors, LLC (“CRA”) has completed an appraisal of the above-referenced property as requested by our March 3, 2011 engagement letter. The purpose of this assignment is to estimate the Market Value of the Fee Simple Interest in the subject property, free and clear of mortgage financing as of March 10, 2011, the date the property was inspected by the appraiser. The report has been prepared for Concap Equities, Inc., for client’s use in asset evaluation and financial reporting purposes.

Situated as noted above, the subject property consists of a 28.01-acre site improved with a 350-unit garden-style apartment complex containing 386,500 square feet of rentable area. Additional site improvements include two outdoor swimming pools, playground, tennis courts, fitness center, gated entry, clothes care center, asphalt paved driveways and surface parking areas, concrete walkways and landscaping. The complex, locally known as the Arbours of Hermitage Apartments, is classified as a Class B/C apartment community by local market standards. The property, originally developed in 1972, has a stabilized operating history and is in average physical condition in comparison to substitute properties of similar age and characteristics. The subject property is more fully described, legally and physically, within the attached report.

Based on the analysis contained in the attached report, the Market Value of the Fee Simple Interest in the subject property, free and clear of mortgage financing, as of March 10, 2011, is:

SEVENTEEN MILLION FOUR HUNDRED THOUSAND DOLLARS
($17,400,000)

This letter must remain attached to the following report, which contains the pages found in the Table of Contents on Page i. Please also refer to the Basic Assumptions and Limiting Conditions section of the report that includes Extraordinary Conditions/Special Assumptions that were considered in the valuation of the subject property. The report was prepared in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) as set forth by the Appraisal Foundation and in accordance with the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute.

COGENT Realty Advisors, LLC
Commercial Real Estate Valuation, Consultation, Due Diligence
5307 E. Mockingbird Lane, Suite 1050, Dallas, Texas 75206
Tel: 214.363.3373 Fax: 214.369.4388


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page i

TABLE OF CONTENTS


Title Page
Letter of Transmittal
Table of Contents			i
Certificate of Appraisal			ii
Basic Assumptions and Limiting Conditions			iii
Subject Property Photographs & Maps			v

PREMISES OF THE APPRAISAL
Summary of Salient Facts and Conclusions			1
Property Identification			3
Sales History			3
Purpose and Scope of the Appraisal			3
Definition of Value			4
Property Rights Appraised			4
Intended Use and User of the Appraisal and Reporting			4
Exposure and Marketing Periods			5

PRESENTATION OF DATA
Regional and Area Analysis			6
Neighborhood Analysis			9
Site Analysis			13
Improvement Analysis			17
Real Estate Assessments and Taxes			22

MARKET ANALYSIS
Apartment Market Analysis			24
Market Rent Analysis			27

ANALYSIS OF DATA AND CONCLUSIONS
Highest and Best Use			37
Valuation Process			39
Income Capitalization Approach			41
Sales Comparison Approach			50
Reconciliation and Final Value Conclusion			57

ADDENDA
Additional Subject Property Photographs
Floor Plans
Improved Sales Photographs
Appraiser Qualifications

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page ii

CERTIFICATE OF APPRAISAL

We, Steven J. Goldberg, MAI, CCIM and Robert T. Don, certify that to the best of our knowledge and belief:

The statements of fact contained in this appraisal are true and correct.

The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and my personal, unbiased professional analyses, opinions, and conclusions.

We have no present or prospective interest in the property that is the subject property of this appraisal, and have no personal interest or bias with respect to the parties involved.

Our compensation is not contingent upon the reporting of a predetermined value or direction in value that favors the cause of the client, the amount of value estimate, the attainment of a stipulated result, or the occurrence of a subsequent event

Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with 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 Appraisal Practice of the Appraisal Institute.

Steven J. Goldberg, MAI made a personal inspection of the property that is the subject of this appraisal on March 10, 2011. Robert T. Don did not inspect the subject property.

This appraisal was not prepared in conjunction with a request for a specific value or a value within a given range or predicated upon loan approval.

We have the knowledge and experience necessary to perform this appraisal assignment and have extensive experience in the appraisal of similar properties.

As of the date of this appraisal Steven J. Goldberg, MAI has completed the requirements under the continuing education program of the Appraisal Institute.

As of the date of this report, Robert T. Don has completed the Standards and Ethics Education Requirement of the Appraisal Institute for Associate Members.

The use of this report is subject to the requirements of the Appraisal Institute relating to review its duly authorized representatives.

We have not appraised or provided other services relative to the subject property in the past three years.

No one other than the undersigned assisted in the preparation of this appraisal report.

Steven Goldberg, MAI has been issued a temporary appraiser practice permit by the State of Tennessee to conduct an appraisal of the subject property (Permit #56100).

Robert T. Don has been issued a temporary appraiser practice permit by the State of Tennessee to conduct an appraisal of the subject property (Permit #56101).


COGENT REALTY ADVISORS, LLC



By:	Steven J. Goldberg, MAI, CCIM	By:	Robert T. Don
	Managing Partner		Associate

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page iii

BASIC ASSUMPTIONS AND LIMITING CONDITIONS

This appraisal report is subject to the following assumptions and limiting conditions:

1.		No responsibility is assumed for the legal description or for matters including legal or title considerations. Title to the property is assumed to be good and marketable unless otherwise stated.

2.		The property is appraised free and clear of any or all liens or encumbrances unless otherwise stated.

3.		Responsible ownership and competent property management are assumed.

4.		The information furnished by others is believed to be reliable. However, no warranty is given for its accuracy.

5.		All engineering is assumed to be correct. The plot plans and illustrative material in this report are included only to assist the reader in visualizing the property.

6.		It is assumed that there are no hidden or unapparent conditions of the property, subsoil, or structures that render it more or less valuable. No responsibility is assumed for such conditions or for arranging for engineering studies that may be required to discover them.

7.		It is assumed that there is full compliance with all applicable federal, state, and local environmental regulations and laws unless noncompliance is stated, defined, and considered in the appraisal report.

8.		It is assumed that all applicable zoning and use regulations and restrictions have been complied with, unless nonconformity has been stated, defined, and considered in the appraisal report.

9.		It is assumed that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based.

10.		It is assumed that the utilization of the land and improvements is within the boundaries or property lines of the property described and that there is no encroachment or trespass unless noted in the report.

11.		The distribution, if any, of the total valuation in this report between land and improvements applies only under the stated program of utilization. The separate allocations for land and buildings must not be used in conjunction with any other appraisal and are invalid if so used.

12.		Unless otherwise stated, possession of this report, or a copy thereof, does not carry with it the right of publication.

13.		The appraiser, by reason of this appraisal, is not required to give further consultation, testimony, or be in attendance in court with reference to the property in question unless arrangements have been previously made.

14.		Unless otherwise stated, neither all nor any part of the contents of this report (especially any conclusions as to value, the identity of the appraiser, or the firm with which the appraiser is connected) shall be disseminated to the public through advertising, public relations, news, sales, or other media without prior written consent and approval of the appraisers.

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page iv

15.		Unless otherwise stated in this report, the existence of hazardous substances, including without limitation asbestos, polychlorinated biphenyls, petroleum leakage, or agricultural chemicals, which may or may not be present on the property, or other environmental conditions, were not called to the attention of nor did the appraiser become aware of such during the appraiser’s inspection. The appraiser has no knowledge of the existence of such materials on or in the property unless otherwise stated. The appraiser, however, is not qualified to test such substances or conditions. If the presence of such substances, such as asbestos, urea formaldehyde foam insulation, or other hazardous substances or environmental conditions, may affect the value of the property, the value is predicated on the assumption that there is no such condition on or in the property or in such proximity thereto that it would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

16.		The Americans with Disabilities Act (“ADA”) became effective January 26, 1992. The appraiser has 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 upon the value of the property. Since the appraiser has no direct evidence relating to this issue, he did not consider possible non-compliance with the requirements of the ADA in estimating the value of the property.

17.		Former personal property items such as kitchen and bathroom appliances are now either permanently affixed to the real estate or are implicitly part of the real estate in that tenants expect the use of such items in exchange for rent and never gain any of the rights of ownership. Furthermore, the intention of the owners is not to remove the articles which are required under the implied or express Warranty of Habitability. The accounting for the short-lived nature of such items is reflected in a reserves for replacement expense category.

EXTRAORDINARY ASSUMPTIONS/SPECIAL CONDITIONS

1.		We have not been provided with a current survey, architectural plans or other specifications for the subject property. Therefore, we have relied upon data obtained from public records, our cursory inspection of the property and client provided rent roll data and floor plans for the purpose of estimating the site and building size and other details pertaining to the existing improvements.

2.		Our inspection of the property comprised an overview of the exterior common areas as well as the interior of a random sampling of individual units. Our analysis is conditioned upon the assumption that the units not inspected are representative of similar condition and layout as the inspected units.

3.		The scope of our inspection of the subject property is limited to a cursory overview for valuation purposes only. All electrical, plumbing, mechanical and structural systems are assumed to be in proper working order. An inspection by a licensed contractor and/or engineer is recommended for further detailed information regarding the condition of the subject property.

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 1

SUMMARY OF SALIENT FACTS AND CONCLUSIONS


*Date of Value*		March 10, 2011

*Date of Inspection*		March 10, 2011

*Property Name*		Arbours of Hermitage Apartments

*Property Address*		6001 Old Hickory Boulevard Nashville, Tennessee 37076

*Property Location*		Northeast corner of Old Hickory Boulevard and Bell Road, approximately 1,000 feet south I-40, in the community of Hermitage, Nashville, Davidson County, Tennessee. The property is generally situated in the eastern portion of the Nashville metropolitan region, approximately 15 miles east of the Nashville Central Business District.

*Purpose and Use*		Estimate the Market Value of the Fee Simple Interest in the subject property as of March 10, 2011, free and clear of mortgage financing. The appraisal was prepared for ConCap Equities, Inc. to provide a valuation of the property for client’s use in asset evaluation and financial reporting purposes.

*Site Size*		Rectangular shaped site that contains a total of 28.01± acres

*Zoning*		R-15, Multi-Family Residential District by Davidson County

*Improvements*		Situated as noted above, the subject property consists of a 28.01-acre site improved with a 350-unit garden-style apartment complex containing 386,500 square feet of rentable area. Additional site improvements include two outdoor swimming pools, playground, tennis courts, fitness center, gated entry, clothes care center, asphalt paved driveways and surface parking areas, concrete walkways and landscaping. The complex, locally known as the Arbours of Hermitage Apartments, is classified as a Class B/C apartment community by local market standards. The property, originally developed in 1972, has a stabilized operating history and is in average physical condition in comparison to substitute properties of similar age and characteristics.

*Tax Identification*		097-00-0-087.00 (Davidson County Property Appraiser’s Office)

Total 2010 “Certified” Appraised Value		$13,675,000; $5,470,000 Assessed Value

Highest and Best Use As If Vacant As Improved		Eventual multifamily development Continued use of the existing improvements

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 3

PREMISES OF THE APPRAISAL


*Identification*		The subject property consists of a 28.01±-acre site improved with a 350-unit apartment complex known as Arbours of Hermitage Apartments.

		The physical address of the property is 6001 Old Hickory Boulevard, Davidson County, Tennessee. The subject property is located in the Hermitage area of metropolitan Nashville, approximately 15 miles east of the Nashville Central Business District.

		The subject property is indentified by the Davidson County Property Assessor as Tax Parcel Number 097-00-0-087.00.

*Sales History of the Subject Property*		According to public records, ownership of the subject property is vested in AIMCO Arbours of Hermitage, LL. We are not aware of any arms length transfers of ownership within the three-year period prior to the effective date of value. We are not aware of any contracts of sale pending as of the date this report was prepared.

		It is our understanding that the subject property is not currently being marketed for sale however it was recently offered for sale and under contract to sell. According to Mr. Jason Nettles with HFF, the listing agent, the property was under contract to sell at price reported at $17,000,000, or $48,571 per unit. The potential buyer terminated the sale contract in late February 2011 as they were unable to obtain satisfactory financing to close the transaction. The reported contract price is within a tolerable variance of the market value estimated concluded for the subject property herein.

*Purpose and Scope of the Appraisal*		The purpose of the appraisal is to estimate the market value of the subject property free and clear of mortgage financing as of the date of value. It is the intent of the appraisers that the analysis, opinions and conclusions of this report be considered an unbiased, objective investigation performed by a disinterested third party with complete objectivity as to the outcome of the analysis.

		According to the Appraisal Institute’s Code of Professional Ethics and Uniform Standards of Professional Appraisal Practice, the scope of the appraisal is cited as “the extent of the process of collecting, confirming, and reporting data” included in an appraisal report. All appropriate data deemed pertinent to the solution of the appraisal problem has been collected and confirmed. In our appraisal of the subject property, we have:

		1. Inspected the subject property and its environs.

		2. Reviewed demographic and other socioeconomic trends pertaining to the city and region.

		3. Examined regional apartment market conditions, with special emphasis on the subject property’s apartment submarket.

		4. Investigated lease and sale transactions involving comparable properties in the influencing market.

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 4


		5. Reviewed the existing rent roll and discussed the leasing status with the building manager and leasing agent. In addition, we have reviewed the subject property’s recent operating history and those of competing properties.

		6. Utilized appropriate appraisal methodology to derive estimates of value.

		7. Reconciled the estimates of value into a single value conclusion.

*Definition of Market Value*		Market Value is defined by the Appraisal Institute, The Dictionary of Real Estate Appraisal, Fourth Edition, Chicago, Illinois, Appraisal Institute, 2002, as:

		The most probable price which a specified interest in real property is likely to bring under all of the following conditions:

		1. Consummation of a sale occurs as of a specified date.

		2. An open and competitive market exists for the property interest appraised.

		3. The buyer and seller are each acting prudently and knowledgably.

		4. The price is not affected by undue stimulus.

		5. The buyer and seller are typically motivated.

		6. Both parties are acting in what they consider their best interest.

		7. Marketing efforts were adequate and a reasonable time was allowed for exposure in the open market.

		8. Payment was made in cash, in U.S. dollars or in terms of financial arrangements comparable thereto.

		9. The price represents the normal consideration for the property sold, unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

*Property Rights Appraised*		Fee Simple Estate. A Fee Simple Estate is defined in The Dictionary of Real Estate Appraisal, Fourth Edition, Chicago, Illinois, Appraisal Institute, 2002, as:

		“Absolute ownership unencumbered by any other interest or estate, subject only to the limitations of the four powers of government (eminent domain, escheat, police power and taxation)”.

*Intended Use and Intended User*		The intended user of this report is Concap Equities, Inc., the general partner of the entity that owns the subject property. It is understood that this appraisal will be utilized by the intended user as an aid in asset evaluation and financial reporting. All others reading or relying on this appraisal report are considered unintended users of this appraisal. The appraisal cannot be used for any other reason than that stated above. Should anyone other than the client read or rely on this report, no fiduciary obligation is owed by the appraisers to that party. The appraisers are not responsible for unauthorized use of this report.

		This appraisal has been prepared in compliance with the Uniform Standards of Professional Appraisal Practice (USPAP) as promulgated

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 5


		by the Appraisal Standards Board of the Appraisal Foundation as well as the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. The presentation of data and results of our analysis are presented in a Self-contained Report format as set forth under Standards Rule 2-2 of the USPAP.

*Exposure Period*		According to the previously stated definition of Market Value, the property must be allowed a reasonable time to be exposed in the open market to achieve the appraised value. Exposure is defined by the Appraisal Institute, The Dictionary of Real Estate Appraisal, as:

		• The time a property remains on the market.

		• The estimated length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market. Exposure time is always presumed to occur prior to the effective date of the appraisal. The overall concept of reasonable exposure encompasses not only adequate, sufficient and reasonable time but also adequate, sufficient and reasonable effort. Exposure time is different for various types of real estate and value ranges and under various market conditions.

		Review of transfer records suggests that there is an active investor market for good quality apartment properties. Although marketing times increased over the past couple of years as a result of economic conditions, market fundamentals for apartment properties and overall economic conditions have begun to improve over the past few quarters resulting in an increase in investor demand, transaction activity and resulting decline in marketing times for most types of good quality commercial real estate investments.

		We believe that if the subject property were exposed to the market for a reasonable period of time prior to the effective date of this appraisal, which we consider to be a period of up to 12 months, the subject property would transfer at an appropriate price, that is to say, the appraised value. Support for this exposure period is provided by the Korpacz Real Estate Investor Survey Fourth Quarter 2010, which indicates that marketing times for apartment properties in the national market range from 1 to 18 months. The average marketing time equates to 6.29 months, down from 8.86 months reported one year ago. This marketing period is supported by data in the local market.

		We acknowledge that in appraising the property to sell after the aforementioned exposure period, we must place most emphasis on the buyer’s expectations and yield requirements. The value conclusion rendered for the property through implementation of the Income Capitalization Approach has been accorded most significance as this technique most closely emulates buyer’s expectations and yield requirements. The market value estimate concluded herein assumes an exposure and marketing period of up to 12 months has occurred.

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 6

REGIONAL AND AREA ANALYSIS


*Introduction*		Real estate values reflect the influence of four primary forces that motivate human activity; social trends, economic conditions, governmental policies and environmental factors. The purpose of the city data synopsis is to describe and analyze the area within which the interactions of the four major forces influence properties similar to the subject. This section will further analyze past trends for insight into possible future trends affecting the value of real estate.

		The subject property is located within the Nashville-Davidson-Murfreesboro-Franklin Tennessee Metropolitan Statistical Area (MSA), a 13-county area covering more than 6,800 square miles. The MSA is nationally ranked 38^th in population size. Nashville is the principal city of the MSA.

		Nashville, centrally located in the State of Tennessee is approximately 210 miles east of Memphis, 190 miles north of Birmingham, AL, and 150 south of Louisville, KY.

		Relevant socioeconomic characteristics of the area include the following: population, income, employment, transportation, and quality of life issues.

*Population*		According to the U.S Census Bureau, the Nashville-Davidson-Murfreesboro-Franklin Tennessee MSA had a 2009 population of 1,582,264. All of the counties within the Nashville MSA experienced positive population growth from 2000 to 2009. According to ProximityOne.com, the populating growth for the Nashville-Davidson-Murfreesboro-Franklin Tennessee MSA is projected to increase to 1,990,370 by 2020, or a 25.8% increase between 2009 and 2020. The following table illustrates the population statistics for the Nashville-Davidson-Murfreesboro-Franklin Tennessee MSA.

HISTORICAL POPULATION TRENDS


					% Change
	2000		2009		2000-2009

Nashville MSA		1,311,789		1,582,264		20.6	%
Cannon County		12,826		13,860		8.1	%
Cheatham County		35,912		39,876		11.0	%
Davidson County		569,892		635,710		11.5	%
Dickson County		43,156		48,230		11.8	%
Hickman County		22,295		23,805		6.8	%
Macon County		20,386		22,057		8.2	%
Robertson County		54,434		66,581		22.3	%
Rutherford County		182,023		257,048		41.2	%
Smith County		17,712		19,201		8.4	%
Sumner County		130,448		158,759		21.7	%
Trousdale County		7,259		7,922		9.1	%
Williamson County		126,638		176,836		39.6	%
Wilson County		88,806		112,377		26.5	%


Source: U.S Census Bureau

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 7


*Economy*		The Nashville-Davidson-Murfreesboro-Franklin Tennessee MSA boasts a diversified economy with several sectors leading the employment base, including healthcare, education, publishing and music recording. Tourism, related to the music entertainment industry has historically played a major role in the Nashville economy. Telecommunications, biotechnology, and other high tech industries are rapidly growing segments of the local economy. Major employers in the area include Vanderbilt University, State of Tennessee, United States Government, Metro Nashville- Davidson County School District, St. Thomas Health Services, Metropolitan Government of Nashville and Davidson County, Nissan North America, and HCA.

		The following table illustrates the Nashville-Davidson-Murfreesboro-Franklin Tennessee MSA historical employment trends.

NASHVILLE MSA EMPLOYMENT TRENDS


	Employment					Unemployment
Date	Total		% Change Year Ago			% Rate		Basis Points Change Year Ago

2005		719,865		2.5	%		4.5		0
2006		743,779		3.3	%		4.2		-30
2007		754,462		1.4	%		4.1		-10
2008		755,195		0.1	%		5.8		170
2009		722,214		-4.4	%		9.3		350
2010		746,645		3.4	%		8.1		-120


Source: U.S. Bureau of Labor Statistics


		The unemployment rate in the Nashville-Davidson-Murfreesboro-Franklin Tennessee MSA has been generally lower to that of the State of Tennessee. This trend has continued through to present day. Beginning in 2008, as the national economy began to slip into a recession, the unemployment rates in Tennessee, as well as the Nashville-Davidson-Murfreesboro-Franklin Tennessee MSA have generally been lower than the US national average rates.

		Total employment stands at approximately 746,645 workers for the Nashville-Davidson-Murfreesboro-Franklin Tennessee MSA. The local MSA unemployment rate of 8.1 percent as of YE 2010 was lower than the state and national unemployment rate of approximately 9.4%. The majority of the MSA workforce is employed in the Leisure and Hospitality sector. Other major employment sectors include Trade, Transportation and Utilities.

		According to an annual economic forecast produced for the governor of the State by the Center for Business and Economic Research at the University of Tennessee, un-employment is expected to decline this year but not recover its pre-recession level until 2014. The report calls 2010 a “roller coaster” year with initial economic progress slowing midyear only to pick up again toward the end. The third quarter produced a year-over-year gain in employment and the unemployment rate fell to 9.4 percent by the close of 2010. The year wasn’t great, but it was a far cry from the possible 11 percent some were predicting at the end of 2009. The report projects an unemployment rate of 9.1 in 2011 and 8.8 in 2010. It warns that the unemployment rate will remain above its pre-recession low

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 8


		through the end of the decade. There are several reasons for that. For one, many people “in Tennessee and across the country will remain `structurally unemployed’ because their skill set does not match the requirements of employers,” according to the report. “Ongoing economic restructuring means the emergence of new products and services along with new jobs and occupations. Many of the jobs in greatest demand today simply did not exist 10 years ago within Tennessee.

*Transportation*		The Nashville International Airport is a joint civil-military airport in southeastern Nashville. The Airport served nearly 10 million passengers and 79,000 tons of cargo in 2008.

		Major thoroughfares in the area include Interstate Highways 40, 65 and 24, providing excellent regional highway access, with linkages to nearby Memphis, TN, Louisville, KY, and Birmingham, AL. Other major state roadways include Briley Parkway (SH 155), I-440, and SH 100, providing links to the region’s primary arterial highways.

		The Nashville Metropolitan Transit Authority (NMTA) operates a fixed route bus system throughout the greater Nashville area, serving the city of Nashville and Davidson County. Outside Davidson County the NMTA collaborates with the Regional Transportation Authority to provide express bus service along select routes.

*Conclusion*		The employment sectors in the MSA are generally diverse. The largest employment sectors being Government and Education, followed by Trade, Transportation and Utilities, and Professional and Business Services. Several years of declining workforce and escalating unemployment rates have had negative influences on the region. However, recent improvements in the unemployment rate, have analysts hopeful that an economic recovery is underway.

		Much of the Nashville MSA economy is diversified with an educated workforce and the prospect for the MSA’s recovery is good. Long term, many believe that the regional economy will outperform that of the nation.

		Based on this analysis, it is anticipated that the Nashville region should perform better than many areas within the state and most parts of the country. Long term, the region should experience growth and increasing property values.

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 9

NEIGHBORHOOD ANALYSIS


*Introduction*		The Appraisal of Real Estate defines a neighborhood as “a group of complimentary land uses”. A neighborhood should be distinguished from a district, which is defined as “a type of neighborhood that is characterized by homogenous land use”. A neighborhood will contain land uses complimentary to one another. For example, predominantly residential neighborhoods typically contain some commercial properties that provide services for local residents. The boundaries of a neighborhood can be physical such as a lake, stream or major highway or they may be less easily discernible such as changes in prevailing land use or occupant characteristics.

*Location*		The subject property is situated just south of I-40, along the east side of Old Hickory Boulevard. The location is within the Hermitage area of Nashville, Davidson County. This places the subject approximately 15 miles east of the Nashville Central Business District.

		The subject’s neighborhood may be defined as the land area within the boundaries of I-40 to the north, Bell Road to the west, Earhart Road to the east, and J. Percy Priest Lake to the south. The land uses within the defined neighborhood are complementary and best characterized as a suburbanized residential district with supporting retail and commercial uses. The subject property is situated at the northeast corner of the Old Hickory and Bell Road within the central portion of the defined neighborhood boundaries.

*Land uses*		The subject neighborhood consists of a mixture of mature and recently developed residential areas with supporting commercial and neighborhood support facilities nearby. Commercial uses are situated primarily along the frontage of the arterial roadways and some secondary thoroughfares. The area is a suburban commuter neighborhood of metropolitan Nashville. Many residents commute the 20 minute drive time to the Nashville Central Business District.

		The single-family component comprises approximately 75% of the neighborhood’s land use. The single family housing stock is of average to good quality and appears to have been built since the 1970s. The subject neighborhood is a mature area that has proven to be a desirable residential location as a result of its proximity to the I-40 transportation route and reasonable commuting distance to the city center of Nashville, the regional airport, employment centers, community services and entertainment venues.

		Multifamily housing comprises approximately 10% of the neighborhood’s land use. Competitive multifamily projects are situated throughout the subject neighborhood, primarily along the heavier traveled streets. Primarily developed in the 1970s through 1990s the quality and condition of the multifamily housing is considered typical for the metropolitan area. Typical competitive developments consist of low-rise garden-style buildings with average community and unit amenities.

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 10


		Commercial uses consist primarily of retail strip shopping centers, commercial buildings, auto service and sales facilities and restaurants located along the I-40 corridor and primary thoroughfares which interchange with I-40. The I-40 interchange at Old Hickory Boulevard is heavily developed with a number of commercial projects, including nationally branded hotels, restaurants, retail, auto-service, and other commercial businesses.

		The Summit Medical Center is located immediately north of I-40 along the west side of Old Hickory Boulevard. The Center is also one of the area’s largest employers with 450 support staff, 255 nurses and 300 physicians — totaling 1,005.

		Deloitte & Touche, which is located less than 1 mile from the subject, purchased 10 acres in Hermitage in June 2009 for future expansion. This acquisition coincides with plans to add about 100 jobs to their existing 1,000 local IT, operational and support workers.

		Dell, Inc, which is four miles from the subject, has a 360,000 square foot office facility south of the airport. Dell continues to be the number one shipper of personal computers in the US and number two worldwide; fourth quarter 2010 results detail a 29% increase in shipping and revenue increased by 11% year over year. Dell employs 3,000 workers throughout middle Tennessee; including 1,500 in Nashville.

		A recently announced office park is planned for Donelson, Tennessee, two miles from the subject property. Plans are not finalized, but zoning for the 180 acres to be developed into 2.7 million square feet of mostly Class A office space with a retail and commercial component approved in May 2009 by the Metro Planning Commission.

		The Nashville International Airport, located 4 miles to the west, employs 5,600 on site and is the 10th largest workplace in the region. Constantly expanding and renovating, the airport recently began construction on a new 900,000 square foot consolidated rental car facility. The economic impact on the area is vast with 39,700 in total employment, total payroll of $1.18+ billion and total economic activity of $3.74+ billion.

		J. Percy Priest Lake is situated in the southern portion of the neighborhood, and is a major recreational resource for the greater Nashville area. The lake covers portions of Davidson, Rutherford, and Wilson Counties and consists of 14,200 acres of water and is surrounded by 18,854 acres of public lands. The lake is heavily used by local residents for boating, fishing, picnic, and special function activities.

*Access*		Primary access to the subject neighborhood is provided by I-40 which interchanges with Old Hickory Boulevard approximately 1,000 feet north of the subject property. I-40 is the main commercial corridor through Hermitage. At the subject location, Old Hickory Boulevard is a two lane

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 11


		road with center turn lane. The Nashville International Airport is three to four miles east of the neighborhood.

*Schools/ Services*		The neighborhood is located within the Metropolitan Nashville-Davidson County School District and is locally served by several elementary, middle and high schools. Many private schools are found throughout the Hermitage/Nashville area.

		Community services in the neighborhood include police and fire protection provided by Davidson County. All utility services are available in the neighborhood. Regional medical facilities are conveniently located throughout the Nashville-Davidson County metropolitan area and easily accessible from the subject’s neighborhood.

*Demographics*		The following table is a summary of the key demographic trends within a three-mile radius of the subject property. The data indicates that the population and household incomes of the area is forecasted to increase at moderate rates over the next five years.

SUMMARY OF DEMOGRAPHIC TRENDS


	2000		2010		2015 Projection

Population		33,665		40,127		43,825
Households		14,610		17,438		19,065
Median Age		33.0		34.7		34
Median Hsld. Income	$	45,886	$	61,444	$	69,815
Per Capita Income	$	23,208	$	31,083	$	34,295


*Conclusion*		In summary, the subject neighborhood is a well located, stable and established residential area that offers good access to other parts of the metropolitan area. The neighborhood is adequately serviced by public utilities, services and community facilities. There appears to be no detrimental influences upon the neighborhood which would inhibit the income-producing capabilities of the subject property. The long-term prospects for the neighborhood and the subject property are positive.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 13


		SITE ANALYSIS

*Location*		The physical address of the property is 6001 Old Hickory Boulevard, Nashville, Tennessee 37076.

		The subject property is situated at the northeast corner of Old Hickory Boulevard and Bell Road, approximately 1,000 feet south of I-40, in the Hermitage area of Nashville, Davidson County. This places the subject approximately 15 miles east of the Nashville Central Business District.

*Site Area*		The total land area equates to 28.01 ± acres, or approximately 1,220,116 square feet.

*Street Frontage*		The subject site is afforded with an adequate amount of frontage along the east side of Old Hickory Boulevard, the north side of Bell Road and the south side of Lake Parkway.

*Accessibility/Visibility*		Primary ingress and egress to the property is via a single access point from the east right-of-way of Old Hickory Boulevard and a secondary access point along Bell Road. At the subject property Old Hickory Boulevard is a two-lane roadway with center turn lane. It is situated at-grade with the subject property. The subject development is visible to passing traffic.

*Topography*		The site is gently rolling with adequate slope for site drainage.

*Shape*		The parcel is generally rectangular in shape. The size, shape, and configuration of the subject property provide a functional layout, which is similar to competitors.

*Excess/Surplus Land*		Traffic circulation throughout the property and an adequate number of parking spaces is provided on asphalt paved drives and surface lots. Building setbacks allow for landscaped buffers, similar to surrounding properties. There does not appear to be excess or surplus land.

*Utilities*		All customary municipal services and utility hookups are provided.

*Soil Information*		No adverse conditions were readily apparent. It is specifically assumed for purposes of this report that no adverse soils conditions and site stability issues affect the subject property. No soils reports or engineering studies were provided to the appraisers in conjunction with this report. If additional details are required, we recommend that a qualified soil/structural engineer be retained.

*Flood Information*		According to FEMA Flood Insurance Rate Map 47037C0261F, dated April 20, 2001, the subject property is situated in Zone X, a designation which is outside the 500-year flood zone and flood hazard insurance is typically not required.

*Zoning*		The subject site is currently zoned RM-15, Multiple Family Dwelling District by Davidson County. The RM-15 zoning district is intended

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 14


		primarily for moderately high-intensity multifamily residential structures. Multifamily is the intended and permitted use.

SUMMARY OF RM-15 ZONING DISTRICT REQUIREMENTS


Minimum Lot Area		10,000 SF
Maximum Density		15 Units Per Acre
Maximum F.A.R.		0.75
Minimum Rear Setback		20 Feet
Minimum Side Setback		10 Feet
Maximum Height		20 Feet
Parking Requirement		1 space per bedroom up to 2 bedrooms
		0.5 spaces for each additional bedroom


		The subject property, built to a density of 12.5 units per acre, an amount below the current maximum allowed density. With respect to on-site parking the subject property appears to meet local zoning requirements.

*Easements and Encroachments*		Although we were not provided a current title report to review, we are not aware of any easements, encumbrances, or restrictions that would adversely affect the use of the site. A title search is recommended to determine whether any adverse conditions exist. We are not aware of any type of development moratorium that would affect the property.

		No title report or survey showing the location of easements was provided in connection with this assignment. Thus, it is not possible to make a definitive conclusion regarding any potential impacts on value of the location of any such easements or encroachments. Visual observations of the site revealed no adverse easements or encroachments. It appears as though the site is encumbered by utility and access easements typical of a developed site. It is specifically assumed that any easements, restrictions or encroachments that might appear against the title would have no adverse impact on marketability or value.

*Environmental*		No readily observable adverse environmental site conditions were noted. No environmental reports were provided for review. .

*Improvements*		There are 54 apartment buildings and a free-standing two-story building housing the on-site management/leasing office. Additional improvements include two outdoor swimming pools, tennis courts, clubhouse, laundry facilities, playground, asphalt paved surface parking areas and internal paved drives with surface parking.

*Conclusions*		The site attributes are well suited for the existing development and use.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 17


		IMPROVEMENT ANALYSIS

*Year Built/Renovated*		The subject property was originally constructed in 1973 as a garden-style apartment complex.

*Layout & Configuration*		The complex consists of a total of 350 apartment units within 54 two-story residential buildings. The buildings have exterior access to individual apartments. The buildings are sited along internal drives that are integrated with the parking and landscape areas. The total net rentable area of the property equates to 386,500 square feet, which suggests an average unit size of 1,104 square feet.

*Leasable Area/Unit Mix*		The following chart summarizes the unit mix and sizes of the various floor plans at the subject property as indicated by a review of client provided rent roll data and floor plans.

UNIT MIX AND FLOOR AREAS


Unit Type	Floor Plan		Mix		Size (SF)		Total Area

1 Bedroom/1 Bath (TH)		1A10		72		770		55,440
1 Bedroom/1.5Bath		1A15		38		750		28,500
2 Bedroom/1.5 Bath		2A15		70		1,110		77,700
2 Bedroom/2 Bath (TH)		2A20		48		1,270		60,960
2 Bedroom/2 Bath (TH)		2B20		64		1,325		84,800
2 Bedroom/2 Bath		2C20		10		1,150		11,500
3 Bedroom/2 Bath		3A20		16		1,325		21,200
3 Bedroom/2.5 Bath (TH)		3A2.5		32		1,450		46,400

Totals/Average				350		1,104		386,500


Source: Client provided rent roll data; compiled by CRA


		The property contains 110 one-bedroom apartments, 192 two-bedroom apartments and 48 three-bedroom apartments. As of the date of inspection, on site management indicated a physical occupancy of 91.1%.

*Floor Plans*		As indicated, the property offers a variety of two and three-bedroom floor plans, which is typical of the market. Each floor plan provides a living room off of an entry foyer, a dining room off the kitchen and bedroom(s) with ample access to the bath(s). The floor plan includes traditional flats and 2-level townhome floor plans.

EXTERIOR *Structure*		The foundations are reinforced concrete slabs, on grade. The building structure is wood.

*Exteriors*		Vinyl siding and trim with stone.

*Floors*		The floors are assumed to be plywood with carpet or vinyl covering. The ceiling height is approximately 8 feet with some vaulted ceilings.

*Windows*		Individual unit windows are single pane glass set in aluminum frames. Entry doors are metal set in metal frames. Sliding glass doors provide access to the porches or balconies.

*Roof*		The buildings have pitched roofs with composition shingle covers.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 18


INTERIOR FINISHES

*Walls and Ceilings*		Textured and painted drywall.

*Flooring*		Wall-to-wall carpeting throughout except for sheet vinyl in bathrooms, kitchens and unit entry areas.

*Kitchens*		Updated appliance package consisting of a refrigerator/freezer, electric range with oven, microwave, dishwasher and garbage disposal. Cabinets are stained wood.

*Bathrooms*		Shower/tub, toilet, vanity with sink and mirrored medicine cabinet. Wet areas have ceramic tile surround.

MECHANICAL SYSTEMS *HVAC*		Air and heat is provided by individual split systems with exterior condensers. Tenants are responsible for their own utility charges. The system is similar to competing properties.

*Electric Service*		Adequate electric service is provided. Each apartment has a separate panel.

*Plumbing*		Apartment-grade plumbing systems are installed. Each unit is serviced by an individual electric water heater. Water and sewer charges are billed to tenants separately by the property based on a separate billing system.

*Fire Protection*		The property does not have fire sprinklers, however, there are battery operated smoke/fire detectors with pull stations in common area hallways. This is typical for this vintage property in the market.

*Security*		Each unit may be wired for security monitoring at tenant’s discretion and expense.

ANCILLARY AREAS

*Storage Spaces*		No additional storage lockers are provided.

*Loading Facilities*		Tenant moving occurs from the parking lot. The internal drives are accessible to moving vans.

*Landscaping*		Landscaping is adequate and consists of mature vegetation. Native trees and shrubs are plentiful throughout the common areas and between buildings.

*Parking*		The internal drives incorporate the surface parking lots. There appears to be an adequate number of parking spaces provided. The drives and parking lots are asphalt paved.

*Amenities*		Community amenities include two outdoor swimming pool, playground, clothes care facility, tennis courts, clubhouse, fitness center, and gated entry. Unit amenities include washer/dryer connections with appliances (select units), fireplaces (select units), large closets, ceiling fans, patio/balcony, and upgraded kitchens (select units).

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 19


*FF&E Personal Property*		The subject property has office furnishings and equipment for the staff at the management/leasing office, furnishings in the clubrooms and various chairs and tables for the pool decks. Kitchen appliances are also part of personal property. The FF&E are similar to competitive properties.

CONDITION/MAINTENANCE

*Exterior*		Average condition. Overall maintenance appears adequate.

*Roof*		Fair to Average condition. In process of being rated for replacement.

*Interiors*		Average condition. Overall maintenance appears adequate.

*Common Area Amenities*		Average condition. Overall maintenance appears adequate.

*Sidewalks & Paving*		Average condition. Overall maintenance appears adequate with patching and repairs to areas of the site.

*Landscaping*		Average condition. Overall maintenance appears adequate.

*Environmental Conditions*		No readily observable adverse environmental site conditions were noted. No environmental reports were provided for review. The current improvements were originally constructed in 1972 and therefore may have components which contain lead based paint and/or asbestos.

		Conversations with onsite management indicate that various building components do in fact contain asbestos containing materials. As a result, the subject property has historically incurred higher than market standard maintenance expenses to mitigate asbestos containing materials when performing repairs to affected areas.

		As previously indicated, our estimate of market value does not take into account the cost of remediating adverse environmental conditions. We have however provided for an annual expense estimate (as discussed within the expense analysis within the Income Capitalization Approach section of this report) to continue with the mitigation method of conducting repairs to affected areas of the property.

		As we are not experts in environmental conditions, an inspection by a properly licensed and or certified environmental consultant is recommended to ascertain the extent of contamination and the costs associated with removal of the asbestos-containing materials and/or ongoing mitigation of building components that require routine repairs. It should be noted that if the annual cost of ongoing mitigation as determined by an environmental expert differs significantly from the expense estimate utilized by the appraisers in the valuation pro forma (titled therein as “environmental costs”), the concluded market value may be directly impacted and subject to change.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 20

ELEMENTS OF DEPRECIATION


		Based on our field inspection, we note that some elements of depreciation are present at the subject property.

*Physical Deterioration*		The Davidson County Property Appraiser records indicate that the subject improvements were originally constructed in 1972. The overall physical condition is average, with adequate maintenance levels.

		Management indicated that five units are currently off-line due to a recent fire. The reconstruction process for these units is nearing completion and they will be available for re-leasing by the end of March 2011. There are an additional four units which are off-line due to water intrusion and structural issues. These units are under-going relatively minor corrective restoration and are projected by management to be available for re-letting by the end of May 2011.

		Physical deterioration is primarily limited to general aging and normal wear and tear. According to Marshall Valuation Service, buildings similar to the subject property have an economic life of approximately 50 years. The actual average age of the property is estimated at 39 years. The effective age is estimated to be slightly less than the actual age of the improvements as a result of ongoing routine maintenance conducted over the years. The effective age is estimated at approximately 30 to 35 years suggesting a remaining economic life of 15 to 20 years.

*Capital Improvements*		A review of the subject operating statements and budget indicate that an adequate amount of capital expenditures are spent annually so as to maintain the habitability of the apartments. Management has indicated that they are currently rating the building roofs to determine a schedule and cost for roof cover replacements. No cost for roof replacement is available at this time. No other extra-ordinary future expenditures were reported or observed to be required

		In 2008, the bathroom and kitchen areas of 33 apartment units were renovated. Improvements made during the renovation include the installation of brushed nickel hardware and lighting package, faux granite laminated countertops, new “birch” cabinets and new all black appliances. The cost of the renovations was $231,000, or $7,000 per unit. .

*Functional Obsolescence*		The subject property represents standard design, systems and floor plans consistent with traditional garden style apartment complexes. The property operates at rental rates and occupancy levels that are consistent with that of other similar properties within the influencing market, attesting to its functional adequacy and market acceptance. Considering these factors, no adjustment for functional obsolescence is required.

*External Obsolescence*		External obsolescence is a loss in value resulting from conditions that are present outside the subject property and is usually incurable. No site-specific external obsolescence was noted. Adjacent properties and nearby

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 22


		REAL ESTATE ASSESSMENT AND TAXES

*Assessor’s Identification*		The subject property is identified by the Davison County Property Appraiser by Tax Parcel Identification Number 197-00-0-087.00

*Overview*		Real property taxes are based on multiplying the “Assessed Value”, which is 40% of the “Appraised Value” as determined by the Davidson County Property Appraiser, and the Tax Rate, which is determined by municipal, county administration, county school board budgets, several other taxing districts/authorities and also several bond issues.

		Property appraisals are established during periodic reappraisal programs using current real estate values on a 4 year cycle. Between reappraisals, the Assessor’s appraisals generally remain constant, with the exception of instances where the property has changed (new buildings, additions, demolitions, etc.). In addition to assessing new construction annually, the Assessor’s office performs a systematic field review of a portion of the county each year so that during a reappraisal cycle all parcels of property are reviewed. Changes to the property discovered during review may be added to, or subtracted from the property value between reappraisals, but with the appraised value based on the previous reappraisal program.

		The tax year is based on a calendar year, payable in arrears. The FMV is supposed to reflect total property value as of January 1 of each year. The Tax Rate is typically determined after the assessments have been finalized in May and prior to billing in September. Tax payments are due October 1^st and without penalty by February 28^th of the following year.

		The assessor can use all three of the standard appraisal methods to establish an equitable Market Value. Although a property’s assessment is not automatically changed upon sale, the sales price would be considered and included in the general market pricing trend during subsequent revaluations. The assessor has the authority to re-evaluate property annually.

*Assessments*		The subject’s total 2010 appraised value of $13,675,000 is a 10% decline from the 2009 appraised value ($15,200,000). The subject property is scheduled for a reappraisal by the district in 2014. The subject’s appraised value is appropriately aligned with the assessments exhibited by similar properties within the vicinity. Within the State of Tennessee commercial property taxes are based on 40% of the appraised value (referred to as Assessed Value). Therefore the subject property’s current Assessed Value is $5,470,000.

*Property Tax Abatement*		The subject property does not participate in any property tax abatement programs.

*Tax Rate*		Tax rates have remained relatively stable reflecting modest declines over the past several years. This trend, however, is in part related to the general increases experienced on assessed values throughout the county.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 23


		In light of recent declines in economic and market conditions, rates are expected to begin increasing as assessed values have begun to decline.

		According to the subject’s on-line tax notice, dated March 22, 2011, the combined 2010 tax millage rate for all applicable taxing authorities in Davidson County was 3.56677 per $100, resulting in a tax expense of $195,102.

*Franchise Fee Tax*		In the State of Tennessee a franchise tax is levied for the privilege of doing business in the State. The tax is based on the greater of net worth or the book value of real or tangible personal property owned or used in Tennessee. For this purpose net worth or property values at the end of the taxable period are used. The tax rate is $0.25 per $100 of assessed value. In our analysis, we have included this assessment as part of the property tax rate that is used to calculate the tax expense for the subject property. Based on the subject’s current assessment of $5,470,000, the franchise fee tax is estimated to be $13,675 ($5,470,000/$100 x 0.25).

*Real Estate Tax Projection*		The value concluded for the property in this appraisal is reasonably aligned with the current assessment. And not adjustment to the assessed value is warranted.

		Adjusting the 2010 millage rate for inflationary growth, a first-year tax rate of 3.67377/$100 is estimated. To this rate we have added the franchise fee tax of 0.250/$100, resulting in an total tax rate of 3.92377/$100. Applying this rate to the previously discussed estimated assessment of $5,470,000, results in a tax expense of $214,600 (rounded) is estimated for the subject property.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 24


		APARTMENT MARKET ANALYSIS

*Introduction*		The following apartment market analysis is designed to provide the reader an understanding of the Nashville area apartment market and the local submarket within which the subject property competes. The publications and data utilized by the appraisers include Marcus & Millichap Research Services (Fourth Quarter 2010) and RED Capital Group (Third Quarter 2010 and 1^st Quarter 2011).

*Local Market Overview*		Apartment operations in Nashville are firming quickly due to a dearth of available housing options boosting apartment owners’ ability to withdraw concessions and raise rents more aggressively. The housing shortage will remain amplified over the next several months as job growth accelerates and new-home construction is measured.

		In Smyrna, Nissan plans to add up to 1,300 jobs at its vehicle plant and adjacent battery factory to facilitate production of the Leaf electric car. A hotel project in the initial planning stages in Midtown could also generate hundreds of new positions, supporting local apartment operations. Owners in these two areas already boast the lowest vacancy rates in the metro, and conditions will tighten further in 2011.

		While operations remain strongest in the most desirable areas as renters move up to previously unaffordable units, signs of a more broad-based recovery under way have emerged. In the three least expensive areas of the metro, vacancy has retreated by an average of 260 basis points over the past year. Two pre-dominate investment strategies will define the Nashville investment market into the first half of 2011. Risk-averse buyers are targeting stabilized properties with strong operating histories. Agency financing is available for these assets if less than 10 percent vacant. Cap rates average in the low-8 percent range and should remain in this area as long as interest rates stay low.

		At the other end of the quality spectrum, some local buyers are seeking REO properties in value-add plays. These investors are purchasing at low per-door prices, performing light renovations and firming occupancy with plans to dispose of the assets when they meet Fannie Mae or Freddie Mac financing criteria. As more transactions occur, price recovery will become more apparent, encouraging owners to list properties that fall between these two extremes.

*Vacancy*		Apartment vacancy fell to 7.5 percent in the third quarter 2010, an improvement of 210 basis points since the beginning of 2010. In the third quarter 2010, vacancy plummeted 130 basis points as pent-up demand was released. Class A properties were the primary beneficiary of rising apartment demand in the third quarter. Vacancy in the segment decreased 160 basis points in the period to 7.6 percent. In the Class B/C segment, apartment vacancy declined 100 basis points to 7.4 percent in the third quarter 2010. Year to date, lower-tier vacancy has fallen 240 basis points from a cyclical high of 9.8 percent. The outlook is positive, as job growth catalyzes apartment demand, vacancy is projected to fall, and a

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 25


		projected 1.5 percent increase in inventory in 2011 will likely keep vacancy in the mid-7 percent range.

*Rental Rates*		Asking rents in the third quarter 2010 were $751 per month and effective rents climbed to $704 per month, year-to-date gains of 1.2 percent and 2.5 percent, respectively. Apartment owners moved quickly in late 2010 to withdraw concessions when apartment demand turned positive.

		Pricing power is much stronger at the top of the Nashville apartment market. Class A asking rents increased 1.7 percent to $894 per month in the first nine months of 2010, while Class B/C asking rents ticked up 0.6 percent.

		After peaking at nearly four weeks of free rent, concessions retreated to 23 days of free rent in the third quarter 2010. Owners shaved another day from leasing incentives by year end. The outlook is for continued decreases in leasing incentives.

*Sales Trends*		Apartment transactions slowed 13 percent in the most recent 12-month period; however, buyers are coming off of the sidelines. Approximately 60 percent of local transactions were executed in the second half of 2010.

		The median sale price dipped 18 percent to $33,200 per unit in 2010. Buyers acquired newer, smaller properties as distressed sales put downward pressure on values. Average cap rates climbed 70 basis points to the low-8 percent range over the past 12 months. Currently, top-tier properties change hands at first-year yields in the low-7 percent range.

		The outlook is for low interest rates to continue to fuel sales of stabilized assets. It is anticipated that cap rates will continue to fall as transaction velocity increases.

*Capital Markets*		The yield on the 10-year U.S. Treasury held in the mid-2 percent range through October 2010 due to concerns regarding the durability of economic recovery. The yield last peaked at 4 percent in early April 2010.

		Despite significant losses and ongoing troubles associated with Fannie Mae and Freddie Mac’s residential mortgage portfolios, their multifamily holdings continue to outperform, with delinquency rates holding well below 1 percent. The GSEs and commercial banks remain the dominant sources of financing for apartments, but life insurance companies have begun to compete more intensely for attractive deals that meet their criteria.

		Loan-to-values (LTVs) among portfolio lenders range from 55 percent to 75 percent depending on asset quality and location, as well as the strength of the borrower. For best-of-class deals financed by agency lenders, LTVs can push closer to 80 percent. Lenders generally require debt-service coverage ratios of 1.25x to 1.30x, well above pre-crisis levels but relatively close to historical norms.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 26


		All-in mortgage rates offered by portfolio lenders on smaller seven-year loans range from 4.80 percent to 5.75 percent, while agency loans typically price 55 basis points to 100 basis points lower, depending on the deal. Larger seven-year loans of $5 million or more price between 4.5 percent and 5.5 percent among portfolio lenders and 4.0 percent to 4.5 percent for the agencies.

*Submarket Overview*		Nissan plans to hire 1,300 workers for its Leaf assembly plant in Smyrna over the next several months. Apartment operations in the Murfreesboro/Smyrna submarket will continue to improve as a result, and vacancy could dip to the lowest rate in the metro.

		Although Brentwood/Williamson County registered the only annual climb in vacancy in the metro over the past year, conditions tightened in recent quarters. Vacancy was 9.9 percent in the first quarter of 2001 and has since retreated 200 basis points.

		Owners in the Airport/Briley Parkway submarket immediately pulled back on concessions when vacancy began to fall. Over the last 12 months, leasing incentives dropped by nearly a week to 18 days of free rent, one of the lowest levels in the Nashville market.

		The subject property is located proximate to the Donelson/Hermitage/Wilson County submarket. This area reported a YE 2010 vacancy rate of 7.9% which is a decline of 220 basis points over the prior year. Effective rental rates currently average $695 per month, or a 1.5% increase over the prior year.

SUMMARY OF SUBMARKET PERFORMANCE


	4th Qtr. 2010			Y-O-Y Basis		4th Qtr. 2010		Y-O-Y
Submarket	Vacancy			Point Change		Eff. Rent/Unit		% Change

Downtown/West End/Green Hills		5.6	%		-120	$	1,015		-2.9	%
Murfreesboro/Smyrna		5.9	%		-260	$	650		1.4	%
Belle Meade/West Nashville		6.7	%		-130	$	797		-0.9	%
Hickory Hollow		6.7	%		-140	$	607		1.0	%
Murfreesboro Pike/Antioch		7.5	%		-330	$	644		2.5	%
Brentwood/Williamson County		7.9	%		60	$	940		6.7	%
Donelson/Hermitage/Wilson County		7.9	%		-220	$	695		1.5	%
Madison/Rivergate/Hendersonville		8.4	%		-90	$	671		2.9	%
Airport/Briley Parkway		10.4	%		-310	$	590		3.7	%

Averages		7.4	%		-171	$	734		1.8	%


Source:		Marcus & Millichap, Nashville Apartment Market Report, 4^th Quarter 2010.


*Conclusion*		The Nashville region appears to be recovering from the recent downturn in economic conditions which have dominated over the past several years. Vacancy and effective rental rates appear to be improving. Owners indicate concessions are tapering off and leasing velocity appears to be improving. The subject property is located within a submarket that performed in a generally similar fashion as the overall Nashville area with respect to vacancy and effective rental rates. As overall economic conditions continue to improve, the prospect for continued improvements in the operating performances of area apartment properties is considered good.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 20


		MARKET RENT ANALYSIS

*Subject Property Leasing*		A March 2011 Rent Roll was provided for the subject. The asking rents are summarized in the following table. It should be noted that these rents are the average asking rents only and not the rents currently being paid.

SUBJECT CURRENT ASKING RENT SUMMARY


Type	Mix		Size (SF)		Total Area		Asking Rent		Rent/SF		Total Rent

1 Bedroom/1 Bath (TH)		72		770		55,440	$	668	$	0.868	$	48,096
1 Bedroom/1.5Bath		38		750		28,500	$	674	$	0.899	$	25,612
2 Bedroom/1.5 Bath		70		1,110		77,700	$	682	$	0.614	$	47,740
2 Bedroom/2 Bath (TH)		48		1,270		60,960	$	723	$	0.569	$	34,704
2 Bedroom/2 Bath (TH)		64		1,325		84,800	$	880	$	0.664	$	56,320
2 Bedroom/2 Bath		10		1,150		11,500	$	802	$	0.697	$	8,020
3 Bedroom/2 Bath		16		1,325		21,200	$	967	$	0.730	$	15,472
3 Bedroom/2.5 Bath (TH)		32		1,450		46,400	$	929	$	0.641	$	29,728

Totals/Average		350		1,104		386,500	$	759	$	0.687	$	265,692


*Competitive Set*		In order to determine the market rent for the subject’s apartment units, a survey of comparable apartment complexes considered most similar to the subject was conducted. The subject competes with a number of properties in the area. Due to the large size of the submarket, we included a representative sample of the competitive properties. All of the properties are in close proximity of the subject and define the range of property, unit types and rental rates available in the immediate area.

		The information regarding the rent comparables was obtained through physical inspections and direct interviews of rental agents and property managers. The following map illustrates the location of the comparable properties in relation to the subject. Data sheets summarizing details of the subject and comparable properties follow the map.

COMPARABLE RENTAL MAP

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 28


*SUBJECT PROPERTY*		Arbours of Hermitage
		6001 Old Hickory Boulevard
		Nashville, Tennessee


*Units*		350

*Year Built / Renovated*		1972

*Occupancy*		91%

*Amenities*		Community amenities include two swimming pools, playground, clothes care center, tennis courts, clubhouse with fitness center, and gated entry. Unit amenities include patio/balcony, fireplaces (select units) washer/dryer appliances (select units), large closets, renovated kitchens with microwave (select units), and ceiling fans.

*Concessions*		Point pricing adjusts rates daily. No concessions.

RENTAL DATA


Type	Mix		Size (SF)		Total Area		Asking Rent		Rent/SF		Total Rent

1 Bedroom/1 Bath (TH)		72		770		55,440	$	668	$	0.87	$	48,096
1 Bedroom/1.5Bath		38		750		28,500	$	674	$	0.90	$	25,612
2 Bedroom/1.5 Bath		70		1,110		77,700	$	682	$	0.61	$	47,740
2 Bedroom/2 Bath (TH)		48		1,270		60,960	$	723	$	0.57	$	34,704
2 Bedroom/2 Bath (TH)		64		1,325		84,800	$	880	$	0.66	$	56,320
2 Bedroom/2 Bath		10		1,150		11,500	$	802	$	0.70	$	8,020
3 Bedroom/2 Bath		16		1,325		21,200	$	967	$	0.73	$	15,472
3 Bedroom/2.5 Bath (TH)		32		1,450		46,400	$	929	$	0.64	$	29,728

Totals/Average		350		1,104		386,500	$	759	$	0.69	$	265,692

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 29


*COMPARABLE RENTAL 1*		The Park at Hermitage
		5900 Old Hickory Boulevard
		Nashville, TN


*Units*		440

*Year Built / Renovated*		1987

*Occupancy*		94%

*Amenities*		Park-like 36-acre setting with lake, two swimming pools, clubhouse, tennis courts, fitness center, boat and RV storage, and dog park. Electric kitchen appliances, patio/balcony, ceiling fans, and wash/dryer connections.

*Concessions*		None.

RENTAL DATA


Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent

1 Bedroom/1 Bath		32		500		16,000	$	445	$	0.89	$	14,240
1 Bedroom/1 Bath		32		575		18,400	$	490	$	0.85	$	15,680
1 Bedroom/1 Bath		72		685		49,320	$	525	$	0.77	$	37,800
1 Bedroom/1 Bath		80		800		64,000	$	580	$	0.73	$	46,400
2 Bedroom/2 Bath		128		1,050		134,400	$	670	$	0.64	$	85,760
2 Bedroom/2 Bath		96		1,150		110,400	$	695	$	0.60	$	66,720

Total/Avg.		440		892		392,520	$	606	$	0.68	$	266,600


Comments		Property is located immediately north of the subject.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 30


*COMPARABLE RENTAL 2*		Spinnaker Cove
		100 Arbour Lake Boulevard
		Nashville, TN


*Units*		278

*Year Built / Renovated*		1987

*Occupancy*		95%

*Amenities*		Washer/dryer connections, electric kitchen appliances, ceiling fans, large closets, patio/balcony, fireplaces (select units), extra storage. Complex amenities include clubhouse, tennis court, fitness center, business center, pool, and on-site management.

*Concessions*		None

RENTAL DATA


Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent

1 Bedroom/1 Bath		55		603		33,165	$	633	$	1.05	$	34,815
1 Bedroom/1 Bath		84		855		71,820	$	678	$	0.79	$	56,952
2 Bedroom/2 Bath		58		1,101		63,858	$	812	$	0.74	$	47,096
2 Bedroom/1 Bath		37		1,120		41,440	$	795	$	0.71	$	29,415
3 Bedroom/2 Bath		44		1,289		56,716	$	940	$	0.73	$	41,360

Total/Avg.		278		960		266,999	$	754	$	0.79	$	209,638


Comments		Property is located just west of the subject property.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 31


*COMPARABLE RENTAL 3*		Greenleaf at Hermitage
		5610 Old Hickory
		Nashville, Tennessee


*Units*		261

*Year Built*		1973

*Occupancy*		90%

*Amenities*		Electric kitchen appliances, large closets, patio/balcony, ceiling fans, vaulted ceilings, and mini-blinds. Complex amenities include outdoor pool with patio/deck area, business/media room, playgrounds, BBQ grill and picnic areas, clothes care centers, and gated entry.

*Concessions*		None

RENTAL DATA


Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent

1 Bedroom/1 Bath		94		750		70,500	$	595	$	0.79	$	55,930
2 Bedroom/1 Bath		55		1,050		57,750	$	650	$	0.62	$	35,750
2 Bedroom/1.5 Bath		35		1,100		38,500	$	699	$	0.64	$	24,465
2 Bedroom/2 Bath		22		1,100		24,200	$	699	$	0.64	$	15,378
3 Bedroom/2 Bath		32		1,200		38,400	$	830	$	0.69	$	26,560
3 Bedroom/1.5 Bath		23		1,200		27,600	$	830	$	0.69	$	19,090

Total/Avg.		261		984		256,950	$	679	$	0.69	$	177,173


Comments		Property is located less than one mile north of the subject property.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 32


*COMPARABLE RENTAL 4*		Creekstone
		266 Stewarts Ferry
		Nashville, TN


*Units*		316

*Year Built / Renovated*		1986

*Occupancy*		97%

*Amenities*		Washer/dryer connections with appliance, electric kitchen appliances with microwave, ceiling fans, vaulted ceilings, wood burning fireplaces, large closets, patio/balcony, and mini-blinds. Complex amenities include gated access, clubhouse, fitness center, two outdoor pools, tennis courts, picnic and grill areas, pet park, and clothes care center.

*Concessions*		Reduced application and deposit fees.

RENTAL DATA


Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent

1 Bedroom/1 Bath		80		569		45,520	$	560	$	0.98	$	44,800
1 Bedroom/1 Bath		80		620		49,600	$	580	$	0.94	$	46,400
2 Bedroom/2 Bath		78		957		74,646	$	765	$	0.80	$	59,670
2 Bedroom/2 Bath		78		1,020		79,560	$	765	$	0.75	$	59,670

Total/Avg.		316		789		249,326	$	666	$	0.84	$	210,540


Comments		Property is located approximately two miles west of the subject.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 33


*COMPARABLE RENTAL 5*		Stewarts Ferry Apartments
		8100 Stewarts Ferry Pike
		Nashville, TN


*Units*		614

*Year Built / Renovated*		1986

*Occupancy*		95%

*Amenities*		Washer/dryer connections with appliances, electric kitchen appliances, ceiling fans, walk-in closets, patio/balcony, fireplaces, and mini-blinds. Complex amenities include clubhouse, fitness center, business center, swimming pools, sports court, grilling and picnic areas, access gates, and jogging trail.

*Concessions*		None reported

RENTAL DATA


Type	Mix		Size		Total Area		Rent		Rent/SF		Total Rent

1 Bedroom/1 Bath		60		533		31,980	$	630	$	1.18	$	37,800
1 Bedroom/1 Bath		60		582		34,920	$	630	$	1.08	$	37,800
1 Bedroom/1 Bath		60		640		38,400	$	695	$	1.09	$	41,700
1 Bedroom/1 Bath		65		667		43,355	$	670	$	1.00	$	43,550
2 Bedroom/1 Bath		70		851		59,570	$	770	$	0.90	$	53,900
2 Bedroom/2 Bath		70		940		65,800	$	788	$	0.84	$	55,160
2 Bedroom/2 Bath		70		942		65,940	$	830	$	0.88	$	58,100
2 Bedroom/2 Bath		55		972		53,460	$	815	$	0.84	$	44,825
2 Bedroom/2 Bath		52		982		51,064	$	885	$	0.90	$	46,020
2 Bedroom/2 Bath		52		1,160		60,320	$	938	$	0.81	$	48,776

Total/Avg.		614		822		504,809	$	762	$	0.93	$	467,631


Comments		Property is located approximately 1.5 miles west of the subject.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 34


*ANALYSIS*		The comparable rental properties are all in the general vicinity of the subject property. The selected comparable properties were built between 1973 and 1986. The rental rates illustrated by the comparable properties provide an indication as to the appropriate market rent level for the subject property.

*One Bedroom Units*		The subject property offers two (2) one-bedroom floor plans that range in size from 750 to 770 square feet. The quoted average rental rates for the floor plans range from $668 to $674 per month, or $0.87 to $0.90 per square foot. The following chart outlines rental rates for similar sized one bedroom floor plans within the competing apartment properties.

ONE-BEDROOM FLOOR PLANS


	Unit Size (SF)	Rent/Month	Rent/SF	Comment

Subject	770	$668	$0.87	Subject
Subject	750	$674	$0.90	Subject

Park at Hermitage	500	$445	$0.89	Similar
	575	$490	$0.85	Similar
	685	$525	$0.77	Similar
	800	$580	$0.73	Similar
Spinnaker Cove	603	$633	$1.05	Similar
	855	$678	$0.79	Similar
Greenleaf at Hermitage	750	$595	$0.79	Inferior
Creekstone	569	$560	$0.98	Similar
	620	$580	$0.94	Similar
Stewarts Ferry	533	$630	$1.18	Superior
	582	$630	$1.08	Superior
	640	$695	$1.09	Superior
	667	$670	$1.00	Superior

Subject Range	750 - 770	$668 - $674	$0.87 - $0.90
Comparable Range	500 - 855	$455 - $695	$0.73 - $1.18


		The rents for comparable one bedroom floor plans range from $455 to $678 per unit per month or $0.73 to $1.05 per square foot, bracketing the subject rent structure.

		The Stewarts Ferry comparable commands the highest rents on a per square foot basis primarily as a result of its smaller unit sizes. The Greenleaf at Hermitage comparable is similar in size to the subject one-bedroom rooms, however, this comparable is inferior to the subject property with respect to appeal and amenities and the rental rate is appropriately aligned below the subject one-bedroom rents.

		The subject’s indicated rents per square foot are appropriately aligned with the middle of the comparable range of rents given the variance in age between the subject and majority of the comparable properties. Review of market data indicates that the subject’s quoted rent structure is market oriented.

*Two-Bedroom Units*		The subject offers four (4) two-bedroom floor plans that range in size from 1,110 to 1,325 square feet. The average rents for these units range from $682 to $880 per unit per month or $0.57 to $0.70 per square foot. The comparable two-bedroom units range in size from 851 to 1,160 square feet

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 35


		and have monthly asking rents ranging from $650 to $938 or $0.60 to $.90 per square foot.

TWO-BEDROOM FLOOR PLANS


	Unit Size (SF)	Rent/Month	Rent/SF	Comment

Subject	1,110	$682	$0.61	Subject
Subject	1,270	$723	$0.57	Subject
Subject	1,325	$880	$0.66	Subject
Subject	1,150	$802	$0.70	Subject

Park at Hermitage	1,050	$670	$0.64	Similar
	1,150	$695	$0.60	Similar
Spinnaker Cove	1,101	$812	$0.74	Similar
	1,120	$795	$0.71	Similar
Greenleaf at Hermitage	1,050	$650	$0.62	Inferior
	1,100	$699	$0.64	Inferior
Creekstone	957	$765	$0.80	Similar
	1,020	$765	$0.75	Similar
Stewarts Ferry	851	$770	$0.90	Superior
	940	$788	$0.84	Superior
	942	$830	$0.88	Superior
	972	$815	$0.84	Superior
	982	$885	$0.90	Superior
	1,160	$938	$0.81	Superior

Subject Range	1,110 - 1,325	$682 - $880	$0.57 - $0.70
Comparable Range	851 - 1,160	$650 - $938	$0.60 - $0.90


		As indicated, the subject’s quoted rent structure is appropriately aligned with the lower end of the range of rents indicated by the majority of the comparable properties given the variance in age and unit size. The subject’s rent structure is most similar to the rents indicated by Park at Hermitage, the most similar property in terms of unit size and effective age. After adjusting for variances in unit size and physical attributes, the subject’s quoted rent structure is deemed market oriented and processed for valuation purposes.

*Three Bedroom Units*		The subject property offers two (2) three-bedroom floor plans that range in size from 1,325 to 1,450 square feet. The quoted average rental rates for these floor plans range from $929 to $967 per month, or $0.64 to $0.73 per square foot. The following chart outlines rental rates for similar sized one bedroom floor plans within the competing apartment properties.

THREE -BEDROOM FLOOR PLANS


	Unit Size (SF)	Rent/Month	Rent/SF	Comment

Subject	1,325	$967	$0.73	Subject
Subject	1,450	$929	$0.64	Subject

Spinnaker Cove	1,289	$940	$0.73	Similar
Greenleafe at Hermitage	1,200	$830	$0.69	Inferior

Subject Range	1,325 - 1,450	$929 - $967	$0.64 - $0.73
Comparable Range	1,200 - 1,289	$830 - $940	$0.69 - $0.73


		The rents for comparable three bedroom floor plans range from $830 to $940 per month or $0.69 to $0.73 per square foot. After considering the adjustments for physical attributes of the subject property in comparison

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 36


		to the comparable sand variance in unit sizes, the subject’s quoted rent structure is deemed market oriented

*Conclusions*		The subject is expected to continue to capture its fair share of the market at the indicated economic rates. The subject’s potential gross market rent is summarized in the following chart.

SUMMARY OF ECONOMIC RENT POTENTIAL


Unit Type	Mix		Size (SF)		Total Area		Average Rent		Rent/SF		Total Rent

1 Bedroom/1 Bath (TH)		72		770		55,440	$	668	$	0.868	$	48,096
1 Bedroom/1.5Bath		38		750		28,500	$	674	$	0.899	$	25,612
2 Bedroom/1.5 Bath		70		1,110		77,700	$	682	$	0.614	$	47,740
2 Bedroom/2 Bath (TH)		48		1,270		60,960	$	723	$	0.569	$	34,704
2 Bedroom/2 Bath (TH)		64		1,325		84,800	$	880	$	0.664	$	56,320
2 Bedroom/2 Bath		10		1,150		11,500	$	802	$	0.697	$	8,020
3 Bedroom/2 Bath		16		1,325		21,200	$	967	$	0.730	$	15,472
3 Bedroom/2.5 Bath (TH)		32		1,450		46,400	$	929	$	0.641	$	29,728

Totals/Average		350		1,104		386,500	$	759	$	0.687	$	265,692

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 37


		HIGHEST AND BEST USE

*Definition*		Highest and Best Use in appraisal theory is defined by the Appraisal Institute, The Dictionary of Real Estate Appraisal, 4^th Edition, Appraisal Institute, Chicago, Illinois, 2002 as “the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. The four criteria the highest and best use must meet are legal permissibility, physical possibility, financial feasibility, and maximum profitability.”

		There are typically two highest and best use scenarios: The highest and best use of the property as improved and the highest and best use of the site as if vacant. In each case, the use must pass four “tests”; it must be physically possible, legally permissible, financially feasible, and maximally productive.

*HIGHEST AND BEST USE AS VACANT*

*Definition*		Highest and Best Use As Vacant is defined as “among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination. The use of a property based on the assumption that the parcel of land is vacant or can be made vacant by demolishing any improvements.”

*Physically Possible*		The subject site’s size and shape would allow for most uses. Surrounding land uses include single family and undeveloped open space. All utilities are available or currently service the site. The physical characteristics of the site would reasonably accommodate any homogeneous and permitted use. The corner location of the site; along with a high amount of road frontage would greatly influence the size and physical layout of any potential development.

*Legally Permissible*		The subject property is currently zoned for medium density residential uses. We are unaware of any adverse easements, restrictions or other agreements affecting permitted uses of the subject site. Given prevailing land use patterns in the area, current zoning and land use designations and recognizing the principle of conformity, some form of multifamily residential development reflecting permitted density is most likely.

*Financially Feasible*		In light of the recent downturn economic conditions, all types of properties have experienced decreasing occupancy and rent levels over the past couple of years. Although economic conditions have begun to improve in recent months, the existing supply of commercial properties and apartment units in the area appears to be sufficient to satisfy the existing level of demand. Given current market conditions, the financial feasibility for large-scale development is questionable at this time.

*Maximally Productive*		Given the above discussion, a holding period of the site as vacant is indicated until market conditions improve to the point financial feasibility is

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 38


		evident. The maximally productive use of the site is future development of a multifamily project to the maximum allowed density.

*Conclusion*		Based upon the preceding analysis, it is our opinion that the Highest and Best Use of the site, as vacant, is for residential development consistent with surrounding land uses when economic conditions clearly justify development.

*HIGHEST AND BEST USE AS IMPROVED*

*Definition*		Highest and Best Use As Improved is defined as “the use that should be made of a property as it exists. An existing property should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one”.

*Physically Possible*		The subject is currently improved with a garden-style apartment complex. The complex, built in 1972, is in average condition and is 91% occupied. The improvements are functional, and have been adequately maintained with on-going repairs occurring when needed.

*Legally Permissible*		The subject property is reportedly an allowed and conforming use of the site.

*Financially Feasible*		The complex is achieving its fair share of the market and is capable of maintaining market rents and market occupancy. Accordingly, the subject improvements contribute a positive return to value.

*Maximally Productive*		The property’s improvements generate a return to the real estate in excess of that generated by the underlying land. There is no alternative use that would currently justify the removal or alteration of the existing improvements.

*Conclusion*		Based upon the preceding analysis, it is our opinion that the highest and best use of the site as improved is for the continued multifamily residential use.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 39


		VALUATION PROCESS

*Introduction*		There are three traditional approaches that can be employed in establishing the market value of the subject property. In practice, an approach to value is included or omitted based on the property type and the quality and quantity of information available in the marketplace. These approaches and their applicability to the valuation of the subject are summarized as follows.

*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 the cost to develop a substitute property of equivalent desirability and utility. In the case of a new building, no deficiencies in the building should exist. 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 external obsolescence. In all instances, the issue of an appropriate entrepreneurial profit — the reward for undertaking the risk of construction — remains a highly subjective factor.

		In the case of income-producing real estate with some items of depreciation, the cost of construction plays a minor and relatively insignificant role in determining market value. Investors are generally not buying, selling, or lending with reliance placed on the methodology of the Cost Approach to establish value. The Cost Approach has not been processed for purposes of this valuation assignment.

*INCOME APPROACH*		The Income Capitalization Approach is based on the premise that value is derived by converting anticipated benefits into property value. Anticipated benefits include the present value of the net income and the present value of the net proceeds resulting from the re-sale of the property.

		There are two methods of accomplishing this: (1) direct capitalization of a single year’s income by an overall capitalization rate and; (2) the discounted cash flow in which the annual cash flows and reversionary value are discounted to a present value for the remainder of the property’s productive life or over a reasonable holding (ownership) period.

		The subject property has an adequate operations history to determine the income-producing capabilities over the near future. In addition, performance levels of competitive properties serve as an adequate check as to the reasonableness of the subject property’s actual performance. As such, the Income Capitalization Approach is utilized in this appraisal.

*SALES COMPARISON*		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 and central to this approach is the principle of substitution. This comparative process involves judgment as to the similarity of the subject property and the comparable sales with respect to many value factors such as location, contract rent levels, quality of construction, reputation and prestige, age and condition, and the interest transferred, among others. The value estimated through this

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 40


		approach represents the probable price at which the subject property would be sold by a willing seller to a willing and knowledgeable buyer as of the date of value.

		The reliability of this technique is dependent upon the availability of comparable sales data, the verification of the sales data, the degree of comparability and extent of adjustment necessary for differences, and the absence of atypical conditions affecting the individual sales prices. The volume of sales activity has recently accelerated in response to recent improvements realized in economic conditions. Our research revealed adequate sales activity to form a reasonable estimation of the subject property’s market value via the Sales Comparison Approach.

*RECONCILIATION*		The final step in the appraisal process is to reconcile the various value indications into a single final estimate. Each approach is reviewed in order to determine its appropriateness relative to the subject property. The accuracy of the data available and the quantity of evidence are weighted in each approach. The resulting estimate represents the subject property’s market value as defined in the appraisal.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 41


		INCOME CAPITALIZATION APPROACH

*VALUATION*		We have employed the Direct Capitalization method to estimate a value for the subject property. Direct Capitalization is defined as “a method used to convert an estimate of a single year’s income expectancy into an indication of value in one direct step, either by dividing the income estimate by an appropriate rate or by multiplying the income estimate by an appropriate factor. Yield and value change are implied, but not identified. The rate at which a stabilized net operating income is converted into value is known as an overall capitalization rate (OAR).” The major tasks involved in this approach to valuing the subject property are:

	1.		Calculate potential gross income from all sources that a competent owner could legally generate.

	2.		Estimate and deduct an appropriate vacancy and collection loss factor to arrive at effective gross income.

	3.		Estimate and deduct operating expenses that would be expected during a stabilized year to arrive at a probable net operating income.

	4.		Develop an appropriate overall capitalization rate to apply to the net operating income.

	5.		Value is estimated by dividing the net operating income by the overall capitalization rate. Any adjustments to account for differences between the current conditions and stabilized conditions are also considered.


*REVENUE ANALYSIS*
*Potential Gross Income*		The potential gross income from apartment unit rentals is calculated at $265,692 per month or $3,188,304 for the appraised year based on the conclusion derived in the Market Rent Analysis section.

*Loss to Lease*		Loss to lease considers a loss in income due to leases in effect, whereby effective rental rates are lower than asking, or market, rental rates. In the case of the subject property, the loss to lease also accounts partially for concessions that are offered in the form of reduced rent.

		The operating statements under review indicate a historical loss (gain) to lease ranging trending downward from of a loss of approximately 5.9% in 2008 to 1.7% in 2010 of the gross rent potential. Review of the current rent roll indicates that current rents in place are 6.6% below the market rents estimated above. As existing leases roll they are assumed to renew at market rent levels and become more in line with the market rent structure. In consideration of the preceding explanation, a 2.5% loss to lease allowance is factored into the valuation pro forma.

*Vacancy/Credit Loss*		The subject has been able to maintain its fair share of market occupancy however market fundamentals have weakened over the recent past. The subject was 91% occupied on the date of inspection. However, this high vacancy includes the nine apartment units which are currently off-line due to damages, but are being refurbished and will be available for re-leasing in the very near term. Excluding the down units the subject’s effective

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 42


		occupancy is approximately 96%. The subject’s effective vacancy rate of 4.0% is lower than the Donelson/Hermitage/Wilson county submarket vacancy rate of 7.9% and the Nashville average vacancy of 7.4%. The subject’s 96% effective occupancy level for available units is aligned with the middle of the range of occupancy levels reported by competitors in the immediate area. Occupancy levels for the competing properties in the influencing market area are outlined in the following table.

OVERVIEW OF COMPETITIVE OCCUPANCY LEVELS


Name	YOC		Total Units		Occupancy

Park at Hermitage		1987		440		94	%
Spinnaker Cove		1987		278		95	%
Greenleaf at Hermitage		1973		261		90	%
Creekstone		1986		316		97	%
Stewarts Ferry		1986		614		95	%

Averages		1984		382		94	%


		Between 2008 and 2009 the subject occupancy averaged 94.6%, increasing to 92.9% in 2010 when the property suffered fire damage and units were taken off-line. As these units are refurbished and enter the market we anticipate that occupancy for the subject property will improve and reflect prior year trends. The 2011 budget estimates a vacancy and collection loss allowance of 6.7% and includes a partial year allowance to account for the down units that will all be back on line within the next 30 to 60 days.

		Based on the current condition of the property and occupancy levels illustrated by competing properties in the influencing area and considering that the down units will be back in production shortly, a vacancy allowance of 5.0% is estimated. Collection losses are anticipated to be minimal and no additional allowance is processed in the valuation pro forma. A combined vacancy and collection loss factor of 5.0% is forecasted in the valuation pro forma.

*Administrative Units And Other*		This category includes the expense allocated to providing employee housing discounts. This expense has fallen within a tight range from $29 to $32 per unit between 2008 and 2010. In our analysis we have estimated an allowance of $31 per unit or $10,850.

*Concessions*		Although concessions within the subject’s influencing area are available, the concessions are generally focused on specific units for limited periods of time. Within the market we have noted a trend of declining rent concessions. One of the five rent comparables surveyed offer some form of rent concession.

		At the subject property, concessions amounted to 1.1% of the gross rent potential in 2008, increasing to 2.9% in 2009 and 3.1% in 2010. It is noted from the trailing 12 operating statement (as of January 2011) that the concession allowance equates to 3.1% of gross rent potential, and 2.6% for the most recent quarter; indicating a declining concession level. As market fundamentals continue to improve, concessions will likely

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 43


		continue to abate. Based on the most recent indicators, a concession allowance of 2.5% of the gross rent potential is processed.

*Utility Reimbursements*		Included in this category is the revenue received from tenants paying or reimbursing ownership for their share of utilities and services including water, sewer and trash collection. Utility income has increased from $427 per unit in 2008 to $705 in 2010. The 2011 budget estimates a utility recovery income of $220,259, or $629 per unit. Based on the historical and budgeted utility income receipts, we have estimated Utility Income to be $227,500 or $650 per unit. This amount represents a recovery of 59% of the total utility expenses estimated for the subject property, a recovery amount which is consistent with 2010 actual and 2011 budgeted figures.

*Other Income*		Typically, apartment projects receive additional revenue from sources such as laundry income, vending, application fees, late fees, bad check charges, and deposit forfeitures. Other income receipts at the subject property have declined from $464 per unit in 2008 to $424 per unit in 2010, representing a range of 4.8% to 4.9% of the gross potential income over the past few years. The 2011 budget forecasts an amount equates to $477 per unit, or 5.4% of gross potential income. Other income is projected at $450 per unit or 4.9% for the appraised fiscal year based on historical collections.

*OPERATING EXPENSES*		In order to estimate expenses for the subject property, we have analyzed the subject’s operating expenses for Year End 2008 through Year End 2010 as well as budget for 2011. Expenses for similar apartment properties in the Southeastern United States were also reviewed and considered. The subject’s operating statements under review have been reconstructed and summarized in the following chart.

RECONSTRUCTED OPERATING STATEMENTS — ARBOURS OF HERMITAGE


	Year End 2008						Year End 2009						Year End 2010						2011 Budget
	Total			Per Unit			Total			Per Unit			Total			Per Unit			Total			Per Unit

INCOME:
Gross Potential Rent	$	3,297,090		$	9,420		$	3,117,231		$	8,906		$	3,073,330		$	8,781		$	3,087,268		$	8,821
Loss to Lease		($194,851	)		($557	)	$	0		$	0			($52,494	)		($150	)	$	0		$	0
Vacancy/Collection Loss		($161,569	)		($462	)		($184,368	)		($527	)		($219,190	)		($626	)		($206,555	)		($590	)
Administrative Units & Other		($11,258	)		($32	)		($10,318	)		($29	)		($10,378	)		($30	)	$	0		$	0
Concessions		($37,627	)		($108	)		($90,830	)		($260	)		($96,561	)		($276	)	$	0		$	0
Utility Recovery	$	149,591		$	427		$	185,937		$	531		$	246,575		$	705		$	220,259		$	629
Other Income	$	162,352		$	464		$	153,234		$	438		$	148,492		$	424		$	167,098		$	477

Effective Gross Income	$	3,203,728		$	9,154		$	3,170,886		$	9,060		$	3,089,774		$	8,828		$	3,268,070		$	9,337

EXPENSES:
Payroll and Benefits	$	432,234		$	1,235		$	443,755		$	1,268		$	427,258		$	1,221		$	399,532		$	1,142
Repairs/Maint. & Contract Services	$	180,624		$	516		$	219,978		$	629		$	199,878		$	571		$	195,063		$	557
Environmental Costs	$	120,524		$	344		$	163,352		$	467		$	223,665		$	639		$	155,248		$	444
Administration	$	93,658		$	268		$	77,321		$	221		$	106,960		$	306		$	108,338		$	310
Management Fees	$	158,939		$	454		$	156,808		$	448		$	153,062		$	437		$	163,404		$	467
Utilities	$	271,661		$	776		$	348,054		$	994		$	365,130		$	1,043		$	408,577		$	1,167
Turnover Expenses	$	66,119		$	189		$	71,841		$	205		$	63,676		$	182		$	58,775		$	168
Insurance	$	81,865		$	234		$	148,109		$	423		$	196,028		$	560		$	199,098		$	569
Real Estate Taxes	$	220,374		$	630		$	233,995		$	669		$	208,171		$	595		$	210,321		$	601
Marketing/Leasing	$	62,288		$	178		$	49,311		$	141		$	56,517		$	161		$	67,655		$	193
Reserves	$	0		$	0		$	0		$	0		$	0		$	0		$	0		$	0

Total Expenses	$	1,688,286		$	4,824		$	1,912,524		$	5,464		$	2,000,345		$	5,715		$	1,966,011		$	5,617

Net Operating Income	$	1,515,442		$	4,330		$	1,258,362		$	3,595		$	1,089,429		$	3,113		$	1,302,059		$	3,720

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 44


*Overview*		All of the expenses have fluctuated during the past couple of years. In general, expenses are consistent with market data and reflect stabilized operations. No major changes in operations are expected or appear to be required. Expenses are expected to grow at the average annual inflation rate. Each of the expense items is discussed separately below.

*Payroll*		This expense includes payroll and benefits for the property manager, leasing agent(s), housekeeping, and maintenance personnel. The payroll expense at the subject property has ranged from $1,221 to $1,268 per unit over the past few years. The 2011 budget projects a payroll expense of $399,532, or $1,142 per unit. Based on the subject’s historical expenditures and market data, a salary and benefits expense of $399,000, or $1,140 per unit, is forecast for the appraised fiscal year.

Repairs/Maintenance & Contract Services		This expense line item includes charges for general maintenance and repairs, alarm monitoring and protection services, and landscaping. The property is in average condition no noticeable items of deferred maintenance observed during the walk-thru. The average expense level appears reasonable based on historical figures.

		The maintenance and repair expense at the subject property has ranged from $516 to $629 per unit over the past few years and the 2011 budget forecasts an amount equates to $557 per unit. The repair/maintenance expense is estimated at $196,000, or $560 per unit. We include a separate Reserves category in the projection.

*Environmental Costs*		This category covers the expenses associated with the known asbestos contamination issues at the subject property and the associated costs of professional mitigation and monitoring when repairs and maintenance to environmentally contaminated building components is required. Over the past several years the annual expense has trended upward from $344 to $639 per unit. The 2011 budget estimates an expense of $155,248, or $444 per unit. The expense is largely unknown and dependent on repairs required to only certain building components. In our analysis, we have processed the budgeted amount of $155,200, or $443 per unit.

*Administration/Office*		This category includes administrative charges and costs associated with the running of the management/leasing office including telephone service, office supplies, equipment rental, computers, etc. It also includes typical professional fees associated with ownership (accounting, legal, and consulting), as well as personal/business property taxes. The administrative expenses at the subject property have ranged from $221 to $306 per unit. The 2011 budget estimates an expense of $108338, or $310 per unit. An amount of $275 per unit, or $96,250 is processed for the appraised fiscal year.

*Management Fee*		In the local market management services are typically a function of the revenues produced by the property, usually between 2.0% and 5.0% of collections. In consideration of the market standards and competitive nature

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 45


		of third-party management contracts at this time, we have processed a market-oriented management fee of 3.0% of the effective gross income.

*Utilities*		This expense line item includes charges for common area and vacant unit electricity, water/sewer and trash collection. Utility charges or tenant reimbursements were accounted for in the revenue analysis. The utility expenses at the subject property have ranged from $776 to $1,043 per unit between 2008 and 2010. The 2011 budget forecasts a utility expense of $408,577, or $1,167 per unit. An amount of $1,100 per unit is projected and equates to $385,000 for the appraised fiscal year.

*Turnover Expenses*		This category covers the expenses associated with make-ready work on vacated apartments including paint, carpet, housekeeping, and other repair and maintenance. The turnover expense at the subject property has ranged from $182 to $205 per unit. The 2011 budget estimates an expense of $58,775, or $168 per unit. Turnover expenses are estimated at $70,000 or $200 per unit the appraised fiscal year.

*Insurance*		Insurance includes fire, liability, theft, and boiler, exclusive of the premiums paid to employee benefit plans. The historical insurance expenses at the subject property have trended upward from $234 per unit in 2008 to $560 in 2010. The 2011 budget amount equates to $569 per unit. Insurance expenses are projected at $570 per unit or $199,500.

*Real Estate Taxes*		Real estate taxes are processed as discussed within the Real Estate Assessment and Tax Analysis section of this appraisal. The real estate tax projection is $214,600

*Marketing*		This expense includes advertising, the cost of resident and locator referrals, internal leasing commissions, brochures, newsletters and resident activities. Over the past several years, the historical marketing charges at the subject property have averaged $160 per unit. The 2011 budget projects an expense of $67,655, or $193 per unit. Based on historical expenditures and market data, tempered against the 2011 budget, a marketing expense of$175 per unit, or $61,250 is projected for the appraised fiscal year.

*Reserves*		Prudent management budgets a certain amount each year in a sinking fund to replace short-lived items, including kitchen appliances and cabinets, bathroom fixtures and tiling, flooring repairs, HVAC replacement and common elements such as the roof, exterior wood and parking areas. Reserves for replacement, while typically not found in submitted operating statements, are necessary in estimating a realistic operating budget so as to maintain the habitability of the apartments.

		Reserves for replacement for a property of this vintage typically range from $200 to $350 per unit. In order to remain competitive, a reserve allowance of $300 per unit is forecast. This amounts to $105,000.

*Total Expenses*		On a stabilized basis, the subject’s projected expenses including reserves are projected at $1,979,109, or $5,655 per unit. The indicated operating expense ratio is 61.0% when including reserves and 57.8% without

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 46


		reserves. Because of the extraordinary environment expenses at the subject property, the subject’s operating expense ratio is higher than reported on similar properties in the region. However adjusting for the environmental expenses, the expense ratio is more closely aligned with the range reported by the IREM expense survey, our review of actual operating statistics for similar properties in the metro Nashville area and discussions with local apartment brokers and managers. The total expenses estimated for the subject are market oriented and reasonable.

*VALUATION PRO FORMA*		The following valuation pro forma summarizes the stabilized income and expenses described above for the appraised fiscal year.

VALUATION PRO FORMA


	Pro Forma			Per Unit			Percent

INCOME:							% GPI
Gross Potential Rent	$	3,188,304		$	9,109			100.0	%
Loss to Lease		($79,708	)		($228	)		-2.5	%
Vacancy/Collection Loss		($159,415	)		($455	)		-5.0	%
Administrative Units & Other		($10,850	)		($31	)		-0.3	%
Concessions		($79,708	)		($228	)		-2.5	%
Utility Recovery	$	227,500		$	650			7.1	%
Other Income	$	157,500		$	450			4.9	%

Effective Gross Income	$	3,243,624		$	9,267			101.7	%

EXPENSES:							% of EGI
Payroll and Benefits	$	399,000		$	1,140			12.3	%
Repairs, Maintenance & Contract Services	$	196,000		$	560			6.0	%
Environmental Costs	$	155,200		$	443			4.8	%
Administration	$	96,250		$	275			3.0	%
Management Fees	$	97,309		$	278			3.0	%
Utilities	$	385,000		$	1,100			11.9	%
Turnover Expenses	$	70,000		$	200			1.8	%
Insurance	$	199,500		$	570			6.2	%
Real Estate Taxes	$	214,600		$	613			6.6	%
Marketing/Leasing	$	61,250		$	175			1.9	%
Reserves	$	105,000		$	300			3.2	%

Total Expenses	$	1,979,109		$	5,655			61.0	%
Net Operating Income	$	1,264,515		$	3,613			39.0	%

CAPITALIZATION RATE ANALYSIS


*Overall Capitalization Rate*		This appraisal will consider the following techniques; (a) derivation from comparable sales and (b) investor surveys.

*Derivation from Sales*		Recent comparable sales utilized in the Sales Comparison Approach following this section indicate a range of overall capitalization rates of 7.0% to 8.4% with an average and median of 7.8% and 8.2%, respectively. The capitalization rates from these sales are summarized in the following table.

SUMMARY OF MARKET-DERIVED CAPITALIZATION RATES


Sale No	1		2		3		4		5
Property Name	Franklin Oaks		Enon Springs		Parkwood Villas		The Overlook		Turtle Creek
Date of Sale		5/29/2009		6/25/2009		3/26/2010		5/3/2010		5/6/2010
Year Built		1987		1974		1975		1997		1976
Cap Rate		7.3%		8.3%		8.2%		7.0%		8.4%

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 47


		The sales transactions are relatively recent and the capitalization rates produced by the last two sales are indicative of the most current market conditions; however, these sales occurred in the first half of 2010 and rates have declined since then. The sale properties are all garden-style apartments like the subject property and situated in similar alternative locations in the metropolitan Nashville area. The sale properties were built between 1974 and 1997. The subject property was constructed in the early 1970’s and is in average condition.

		Capitalization rates in the local and national markets have trended downward over the past few quarters. Based on the indicators exhibited by the most recent transactions and considering the downward trend realized in capitalization rates over the past few quarters and subsequent to the dates the comparable transactions occurred, a rate aligned with the low end of the comparable range of rates of approximately 7.0% to 7.5% would be considered reasonable for the subject property.

*Investor Surveys*		According to the PricewaterhouseCoopers Korpacz Real Estate Investor Survey, 4^th Quarter 2010 rates for apartments reported by survey participants active in the market presently range as shown.

NATIONAL APARTMENT MARKET SURVEY


Internal Rate of Return	5.50% - 14.00%	Range
	8.91%%	Average
Overall Capitalization Rate	4.25% - 10.00%	Range
	6.51%	Average
Terminal Capitalization Rate	5.00% - 9.75%	Range
	7.03%	Average


Source: Korpacz Real Estate Investor Survey, 4th Quarter 2010


		As indicated below, overall rates began to increase beginning Third Quarter 2008 and continued to increase through the Fourth Quarter 2009. The first and second quarters of 2010 saw a moderate decline in overall capitalizations rates with more pronounced declines in the third and fourth quarters. This follows general trends in the overall economy that began to deteriorate in approximately the middle of 2008, stabilize in late 2009/early 2010 and improve thereafter. The recent upturn in apartment market fundamentals and investor confidence has resulted in a growing number of transactions and reduction in overall capitalization rates within the past few quarters.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 48

OVERALL CAPITALIZATION RATE TRENDS


Quarter	Average	Basis Point Change
4Q10	6.51%	-61
3Q10	7.12%	-56
2Q10	7.68%	- 17
1Q10	7.85%	-18
4Q09	8.03%	19
3Q09	7.84%	35
2Q09	7.49%	61
1Q09	6.88%	75
4Q08	6.13%	27
3Q08	5.86%	11
2Q08	5.75%	-4
1Q08	5.79%	4
4Q07	5.75%	-1
3Q07	5.76%	-4
2Q07	5.80%	-9
1Q07	5.89%	-8


Source: Korpacz Real Estate Investor Survey


		The 2011 National Apartment Market Report, prepared by Marcus & Millichap Real Estate Investment Services indicates that the extension of quantitative easing by the Fed will help restrain interest rates in the near term, holding the 10-year Treasury yield in the 3.4 percent to 4.0 percent range through most of 2011. Capitalization rates will decline in 2011 after slipping 20 basis points in 2010 to 7.2 percent, led by recompression of the most sought-after deals. Since peaking in 2009, capitalization rates for top-quality properties have fallen by as much as 100 basis points. Additional support for prices derives from historically light construction and demographic shifts that favor rental housing.

*Conclusion of OAR*		The subject is a well maintained apartment complex, in average physical condition and situated in an established residential neighborhood with good access. The property is proximate to employment centers, shopping and neighborhood support facilities. The subject has unit sizes that are larger than market averages and has amenity package that is typical of the properties in the competitive market. The subject was 92% occupied as of March 10, 2011 according to the submitted rent roll. Although the subject property maintains a good location, consideration is given to the age of the project in comparison to the age of competitive properties.

		An OAR ranging from approximately 7.0% to 7.5% was suggested from a review of actual sales data from the local market. The Korpacz investor surveys indicate that the average rate for garden apartments in the national market is approximately 6.5%, and the subject property would be expected to be aligned above the average. In consideration of the preceding data, with primary emphasis placed on the rates extracted from sales data in the local market, a capitalization rate of 7.25% is concluded.

*VALUE BY DIRECT CAPITALIZATION*
*Stabilized Cash Flow*		The stabilized cash flow is based on the previous income and expense discussion. The net operating income is estimated at $679,166 for the appraised fiscal year.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 50


		SALES COMPARISON APPROACH

*VALUATION METHODOLOGY*		The basic steps in processing the sales comparison approach are outlined as follows:

	1.		Research the market for recent sales transactions, listings, and offers to purchase or sell properties similar to the subject property.

	2.		Select a relevant unit of comparison and develop a comparative analysis.

	3.		Compare comparable sale properties with the subject property using the elements of comparison and adjust the price of each comparable to the subject property.

	4.		Reconcile the various value indications produced by the analysis of the comparables.


*REGIONAL SALES MARKET*		The local market has been active in terms of investment sales of similar properties. Adequate sales exist to formulate a defensible value for the subject property via sales comparison.

PRESENTATION OF COMPARABLE SALES		To estimate the property value by the sales comparison approach, we analyzed sales from the influencing market that are most similar to the subject property in terms of age, size, tenant profile and location. The sales are compared on a price-per-unit basis, as this is a common method of comparison for such properties.

		The comparable sales summarized in the chart below and plotted on the following map, range in price from $30,625 to $68,162 per unit. While these unit prices implicitly contain both the physical and economic factors affecting real estate, these statistics do not explicitly convey many of the details surrounding a specific property. Thus, this single index to the valuation of the subject property has some limitations.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments		March 30, 2011
Nashville, Tennessee		Page 51

PRESENTATION OF COMPARABLE SALES DATA


Sale No.	1			2			3			4			5
Project Name	Franklin Oaks			Enon Springs			Parkwood Villas			The Overlook			Turtle Creek
Address	300 N. Royal Oaks			417 Enon Springs Rd			3258 Brick Church Pike			727 Bell Road			121 Hickory Trace Drive
Location	Franklin, TN			Smyrna, TN			Nashville, TN			Nashville, TN			Nashville, TN
Type	Garden			Garden			Garden			Garden			Garden
Buyer	Covenant Capital Group			Dominion Enon Springs LP			Highmark Holdings, LLC			Olympus Property			PAL MF Nashville, LLC
Seller	AIMCO			One Liberty Properties			3258 BCPAssociates			G&IIV Hickory Hollow, LP			Green Realty Management
Sale Price	$	31,900,000		$	5,150,000		$	4,900,000		$	26,150,000		$	11,800,000
Date of Sale		05/29/09			06/25/09			03/26/10			05/03/10			05/06/10
Year Built		1987			1974			1975			1997			1976
No. of Units		468			127			160			452			320
No. of Stories		2.0			2.0			2.0			3.0			2.0
Net Rentable Area (NRA)		372,652			114,043			151,875			420,958			306,090
Average Unit Size (SF)		796			898			949			931			957
Effective Gross Income	$	4,556,810		$	964,625		$	1,167,645		$	3,671,100		$	2,558,160
Operating Expenses	$	2,165,476		$	539,750		$	768,000		$	1,840,600		$	1,571,860
Net Operating Income	$	2,312,750		$	424,875		$	399,645		$	1,830,500		$	986,300
NOI Per Unit	$	4,942		$	3,345		$	2,498		$	4,050		$	3,082
EGIM		7.0			5.3			4.2			7.1			4.6
OER		48	%		56	%		66	%		50	%		61	%
Overall Cap. Rate (OAR)		7.25	%		8.25	%		8.16	%		7.00	%		8.36	%
Price Per Unit	$	68,162		$	40,551		$	30,625		$	57,854		$	36,875
Price Per SF	$	85.60		$	45.16		$	32.26		$	62.12		$	38.55

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments		March 30, 2011
Nashville, Tennessee		Page 53



ANALYSIS OF SALES		The comparables are examined by considering the following adjustment factors.

*Ownership Interest*		No adjustments are necessary, since all of the sales reflect a 100% transfer of ownership interest.

*Financing Terms*		The comparable sales were either all cash transactions or were financed by primary lenders at market-oriented rates. Considerate of such, no adjustments for any unusual or atypical financing is required.

*Conditions of Sale*		Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. We are not aware of any atypical circumstances regarding any of the comparable sales. Personal property is included as all facilities have similar unit appliance requirements and miscellaneous office and common area FF&E.

Expenditures Made Immediately After Sale		Any required major capital costs incurred by the buyer immediately after the sale is appropriately added to the purchase price. Sale #5 was a distressed sale which had a high vacancy and deferred maintenance issues that the buyer was to incur. We adjusted the sale price of this comparable for these expenses within the sale price reported for the transaction. No additional adjustment to the sale price for after sale expenditures is warranted. None of the remaining sales required any specific sale price adjustment other than what is included in general comparisons based on condition.

*Market Conditions (Time)*		Comparable sales that occurred under different market conditions than those applicable to the subject property as of the effective date of appraisal require adjustment for any differences that affect their values. The sales occurred between May 2009 and May 2010.

		Market conditions began to deteriorate in approximately early- to mid-year 2008 in response to weakness that was becoming pronounced in the regional and national economies. In response to weakness in the overall economy, economic vacancy levels at area apartments increased and the operating performance of many properties deteriorated. Capital became difficult to access, underwriting became much more conservative and investor sales activity diminished greatly which resulted in higher capitalization rates and lower values.

		Beginning at approximately mid to late 2009, investor interest and investment sales activity in apartments began to increase and this trend accelerated in 2010. Also, within the last few months economic vacancy levels began to firm and the operating performance of area apartments began to improve. In response to these improvements in market fundamentals, capitalization rates began to contract and overall property values trend upward.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments		March 30, 2011
Nashville, Tennessee		Page 54


		To account for the improvement in market fundamentals that began approximately 12 months ago and continues to occur, the most dated transactions are adjusted upward for changes in market conditions (time).

*Location*		The subject property is a suburban location within the Hermitage area. With the exception of Sale #5, the location of the comparable sales is considered to be generally similar to the subject property location. No adjustment to the sale price paid for these comparables is warranted. Sale #5 is situated in the southeastern sector of Nashville along minor streets. This location is considered inferior to the subject property’s location that is in proximity to I-40. We have adjusted the sale price of this comparable upward for inferior locational characteristics.

*Physical Characteristics*		Physical differences include differences in building size, quality of construction, building materials, age, condition, functional utility and appearance. All of the comparable properties are garden-style apartment complexes like the subject however they are newer construction. As noted, the subject is early 1970s vintage construction. It has been adequately maintained and is in average condition. Appropriate adjustments were made to each of the sale properties to account for their respective age and overall condition at the time of sale in comparison to the subject property.

*Average Unit Size*		The subject has an average unit size of 1,104 square feet. Properties with larger average unit sizes tend to trade at higher prices, all other factors being equal. Conversely, properties with smaller average unit sizes tend to trade at a lower price per unit. The average unit size of each comparable property is compared to the subject and applicable adjustments are applied when warranted.

*Amenities*		The subject offers an amenity package that is typical for a 1970s vintage apartment project. Sale #2, #3 and #5 are 1970s vintage properties and offer similar amenities as the subject property. No adjustment to the sale price paid for these comparables is warranted. Sale #1 and #4 are Class B and A apartment communities offering superior unit and community amenities. We have adjusted the sale price of these comparables downward for superior amenity.

*Economic Characteristics*		Economic characteristics include all the attributes of a property that affect its income. All of the sales were operating at stabilized occupancy and market rates; no adjustment for economic characteristics is required. Sale 5 had high vacancy at the time of sale however the sale price of this comparable was adjusted to reflect the cost of lease up. No additional adjustment to this transaction is warranted.

*Summary of Adjustments*		The preceding adjustments are summarized in the chart on the following chart.

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments		March 30, 2011
Nashville, Tennessee		Page 55

SUMMARY OF ADJUSTMENTS


Sale No.	1			2			3			4			5
Name	Franklin Oaks			Enon Springs			Parkwood Villas			The Overlook			Turtle Creek
Address	300 N. Royal Oaks			417 Enon Springs Rd			3258 Brick Church Pike			727 Bell Road			121 Hickory Trace Drive
	Franklin, TN			Smyrna, TN			Nashville, TN			Nashville, TN			Nashville, TN
Sale Date		5/29/2009			6/25/2009			3/26/2010			5/3/2010			5/6/2010
Price per Unit	$	68,162		$	40,551		$	30,625		$	57,854		$	36,875
ADJUSTMENTS
Financing Adjustment	$	0		$	0		$	0		$	0		$	0

Adjusted for Financing per Unit	$	68,162		$	40,551		$	30,625		$	57,854		$	36,875
Conditions of Sale Adjustment	$	0		$	0		$	0		$	0		$	0

Adjusted for Special Conditions	$	68,162		$	40,551		$	30,625		$	57,854		$	36,875
Time		5.00	%		5.00	%		3.00	%		3.00	%		3.00	%

Time Adjusted Price per Unit	$	71,571		$	42,579		$	31,544		$	59,590		$	37,981

Location		0	%		0	%		0	%		0	%		10	%
Physical Characteristics		-25	%		0	%		0	%		-30	%		0	%
Average Unit Size		25	%		20	%		10	%		10	%		10	%
Amenities		-5	%		0	%		0	%		-5	%		0	%
Economics		0	%		0	%		0	%		0	%		0	%

Total Adjustments (%)		-5	%		20	%		10	%		-25	%		20	%

Adjusted Price per Unit	$	67,992		$	51,094		$	34,698		$	44,692		$	45,578

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments		March 30, 2011
Nashville, Tennessee		Page 56


*VALUE CONCLUSION*		After analysis and adjustments, a value range of $34,698 to $67,992 per unit is indicated. The mean and median adjusted prices are $48,811 and $45,578.

		Consideration is given to the improvement taking place in overall market fundamentals and the recognition that the Sales Comparison Approach is based on trailing market indicators. To account for the improvement in market conditions that is taking place at this time, the most dated transactions were adjusted upward.

		Sales #1 and #3, providing a value rang of $34,698 to $67,992 per unit, required the least adjustment. With primary emphasis placed on these two sales tempered against the mean and median indicators exhibited by all the data, a value in the range of approximately $40,000 to $60,000 per unit is deemed reasonable. The final value of the property via the Sales Comparison Approach is based on $50,000 per unit as follows.


Number of Units		Price per Unit		Indicated Value

350	x	$50,000	=	$17,500,000


		Applying the value concluded above to the Effective Gross Income derived for the property within the Capitalization Approach section, results in an indicated OAR (capitalization rate) of 7.2% and EGIM of approximately 5.4. Both of these indicators are well within the range exhibited by the sales transactions (with OARS ranging from 7.0% to 8.4% and EGIMs ranging from 4.2 to 7.1). These indicators suggest that the value concluded for the property via comparative analysis is reasonable based on the subject property’s income-producing characteristics.

		Accordingly, the Market Value of the Fee Simple Interest in the subject property as of March 10, 2011, free and clear of financing, via the Sales Comparison Approach, is rounded to:
SEVENTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($17,500,000)

COGENT Realty Advisors, LLC



Arbours of Hermitage Apartments		March 30, 2011
Nashville, Tennessee		Page 57

RECONCILIATION AND FINAL ESTIMATE OF VALUE


*Review*		The purpose of this appraisal is to provide an estimate of the market value of the Fee Simple interest in the subject property, free and clear of financing. The date of value is March 10, 2011. The indicated market value estimates for the real property interest appraised are:


Cost Approach		N/A
Income Capitalization Approach	$	17,400,000
Sales Comparison Approach	$	17,500,000


*Cost Approach*		The cost approach value estimate relies on the cost to produce a like structure. The cost approach is not usually considered a reliable value indicator due to the fact that investors in the market area place minimal reliance on this approach because of the age of the property. The cost approach was not considered meaningful in the valuation of the subject property and was not included in the appraisal process.

*Income Approach*		The Income Capitalization Approach was processed. The subject is an income-producing property, and this approach provides good evidence of market value. As the subject represents a stabilized occupancy, the Direct Capitalization method was employed. Based on the applicable analytical methods of the most likely investors in an asset of this type, this approach was given greatest consideration in the final conclusion of market value.

*Sales Approach*		This approach provides an estimate of value based upon the recent activities of buyers and sellers in the marketplace. This approach is generally considered to be reliable in active markets where the motivations of buyers and sellers are known and the operating characteristics of the properties being transferred are available for scrutiny. Although sales volume is down significantly from historical levels, investor interest and sales activity has recently begun to improve. Our market research revealed several sales of properties that are considered relatively comparable to the subject property. The value conclusion derived via this approach, although based no trialing economic indicators, is generally supportive of the value concluded via the Income Approach.

*Conclusions*		Based upon the data, analyses and conclusions contained within this appraisal report with primary emphasis placed on the value derived within the Income Capitalization Approach, the Market Value of the Fee Simple Interest in the subject property, free and clear of mortgage financing, as of March 10, 2011 is:

SEVENTEEN MILLION FOUR HUNDRED THOUSAND DOLLARS ($17,400,000)

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments		March 30, 2011
Nashville, Tennessee		Addenda

STEVEN J. GOLDBERG, MAI, CCIM
MANAGING PARTNER

STEVEN J. GOLDBERG is the Managing Partner of Cogent Realty Advisors LLC, a firm specializing in commercial real estate valuation, consultation and due diligence. His responsibilities include staff supervision, appraisal management, maintaining product quality, marketing and client development.

Mr. Goldberg has over 25 years of nationwide experience in real estate valuation, investment analysis and evaluation consultation. He has performed appraisals throughout the United States and has extensive experience in most markets situated in the Southwest and Southeast regions of the country. Mr. Goldberg’s particular area of expertise is in the appraisal and analysis of multifamily apartment projects. In addition to his expertise in the multifamily market, Mr. Goldberg has extensive experience in the appraisal of other income-producing properties including office buildings, retail properties, lodging facilities, industrial properties and mixed-use projects.

Immediately prior to forming Cogent Realty Advisors, Mr. Goldberg was an Executive Vice President of a national valuation and consulting firm and managed the Southwest regional office. Mr. Goldberg has performed marketability, consultation and feasibility reports, has served as an expert witness and has testified in various state and federal courts. These activities have been performed on behalf of real estate investors, life insurance companies, pension funds, investment banking firms, foreign and domestic financial institutions, mortgage bankers, conduit lenders, real estate advisors, law firms and governmental agencies.

Mr. Goldberg received his Bachelor of Business Administration Degree from the University of Texas in Austin, with major concentrations in both Finance and Real Estate/Urban Land Economics. He is a designated member of the Appraisal Institute and the Commercial Investment Real Estate Institute having been awarded the MAI designation in 1989 and the CCIM designation in 1994. He has attended numerous continuing education courses and has completed the requirements under the continuing education program of the Appraisal Institute.

Mr. Goldberg is state certified as a General Real Estate Appraiser in Texas, Arizona and Georgia. He is also a licensed Real Estate Broker in the State of Texas. He is affiliated with the North Texas Commercial Association of Realtors, International Council of Shopping Centers and Mortgage Bankers Association.

COGENT Realty Advisors, LLC


Arbours of Hermitage Apartments		March 30, 2011
Nashville, Tennessee		Addenda

ROBERT T. DON
ASSOCIATE

ROBERT T. DON, Senior Appraiser with Cogent Realty Advisors, LLC, has a strong background in real estate valuation, management, marketing, and consulting. He has 15 years of national experience within the real estate industry. As a real estate appraiser, Mr. Don has been engaged to perform valuation studies on a variety of complex commercial properties including mixed use developments, regional malls, marinas, and other special use properties. He has significant valuation experience in most national markets.

Mr. Don has worked as an urban planning consultant and asset and marketing manager since 1977. He was manager of land development projects for several large real estate investment companies in Dallas, Texas. In this capacity, Mr. Don was responsible for the marketing and sale of large planned developments and the management of a diverse real estate portfolio. From 1978 to 1983, Mr. Don worked as a land use manager with the nation’s largest land owner, International Paper Company. In this capacity, he instituted a company-wide program for land use decisions, was a review appraiser, planner, and land manager of timberlands, plants, and facilities. In addition to these responsibilities, he became a specialist in timberland analysis and was the real estate manager for 1.2 million acres in the southeastern United States.

Between 1977 and 1978, Mr. Don worked as an urban planning consultant with Gruen Associates, Inc., a national architectural and engineering firm in New York City. During this time, he was consulting planner on diverse projects including expansion of the Metropolitan Museum of Modern Art; light rail transit planning for Buffalo, New York; HUD new town planning for Flower Mound, Texas; feasibility studies for the reuse of the former Penn Central Railroad properties; and community impacts of industrial facility and military base closing.

Mr. Don received his Bachelor Degree of Urban Planning and Design from the University of Cincinnati in 1997. Since then, he has completed graduate work at the Real Estate Institute of New York University and appraisal course work at the Appraisal Institute. He has lectured extensively at universities throughout the United States and has authored articles on land use planning and real estate subjects. Mr. Don is both a licensed real estate broker and State Certified general appraiser in the State of Texas. Mr. Don is a candidate for his MAI designation with the Appraisal Institute. In addition to extensive real estate course work, he has successfully completed certain requirements towards the MAI designation.

COGENT Realty Advisors, LLC


*Income Capitalization*
*Stabilized NOI*	$	1,264,515
*Cap Rate*		7.25	%
*Capitalized Value*	$	17,400,000
*Value per Unit*	$	49,714
*Value per Sq Ft*	$	45.09

*Sales Comparison*	$	17,500,000
*Value per Unit*	$	50,000
*Value per Sq Ft*	$	45.29

*Cost Approach*		N/A

*APPRAISED VALUE*	$	17,400,000


Mr. Trent Johnson Concap Equities, Inc.		March 30, 2011 Page 2


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page v


Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page vi



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 12



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 15



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 16



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 21


		uses benefit the subject property. However, external obsolescence attributable to current market conditions may be applicable.

*Conclusions*		The subject improvements are in physical condition, have adequate functional utility, conform well to the general character of the neighborhood and are generally similar to competitors.



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Page 49


*Valuation*		Value is calculated by dividing the stabilized net operating income (including an allowance for Reserves) by the concluded overall capitalization rate. Thus market value is calculated as follows:


Net Operating Income		OAR		Indicated Value
$1,264,515	÷	7.25%	=	$17,441,586

Rounded				$17,400,000


*Conclusion*		The Market Value of the Fee Simple Interest in the subject property, free and clear of financing, by the Direct Capitalization method of the Income Capitalization Approach, as of March 10, 2011, is rounded to:

SEVENTEEN MILLION FOUR HUNDRED THOUSAND DOLLARS
($17,400,000)



Arbours of Hermitage Apartments Nashville, Tennessee		March 30, 2011 Addenda