EX-99.(C)(7) 9 d07250a2exv99wxcyx7y.txt APPRAISAL OF PROMONTORY POINT APARTMENTS PROMONTORY POINTE 2250 RIDGEPOINT DRIVE AUSTIN, TEXAS MARKET VALUE - FEE SIMPLE ESTATE AS OF MAY 20, 2003 PREPARED FOR: APARTMENT INVESTMENT AND MANAGEMENT COMPANY (AIMCO) C/O LINER YANKELEVITZ SUNSHINE & REGENSTREIF LLP & LIEFF CABRASER HEIMANN & BERNSTEIN ON BEHALF OF NUANES, ET. AL. [AMERICAN APPRAISAL ASSOCIATES(R) LOGO] [AMERICAN APPRAISAL ASSOCIATES(R) LOGO] [AMERICAN APPRAISAL ASSOCIATES(R) LETTERHEAD] JULY 16, 2003 Apartment Investment and Management Company ("AIMCO") c/o Mr. Steven A. Velkei, Esq. Liner Yankelevitz Sunshine & Regenstreif LLP 1100 Glendon Avenue, 14th Floor Los Angeles, California 90024-3503 Nuanes, et al.( "Plaintiffs ") c/o Ms. Joy Kruse Lieff Cabraser Heimann & Bernstein Embarcadero Center West 275 Battery Street, 30th Floor San Francisco, California 94111 RE: PROMONTORY POINTE 2250 RIDGEPOINT DRIVE AUSTIN, TRAVIS COUNTY, TEXAS In accordance with your authorization, we have completed the appraisal of the above-referenced property. This complete appraisal is intended to report our analysis and conclusions in a summary format. The subject property consists of an apartment project having 252 units with a total of 183,600 square feet of rentable area. The improvements were built in 1983. The improvements are situated on 9.1 acres. Overall, the improvements are in average condition. As of the date of this appraisal, the subject property is 85% occupied. It is our understanding the appraisal will be used by the clients to assist the San Mateo Superior Court in the settlement of litigation between the above mentioned clients. The appraisal is intended to conform to the Uniform Standards of Professional Appraisal Practice ("USPAP") as promulgated by the Appraisal Standards Board of the Appraisal Foundation and the Code of Professional Ethics and Standards of Professional Practice of the Appraisal Institute. The appraisal is presented in a summary report, and the Departure Provision of USPAP has not been invoked in this appraisal. It is entirely inappropriate to use this value conclusion or the report for any purpose other than the one stated. AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 2 PROMONTORY POINTE, AUSTIN, TEXAS The opinions expressed in this appraisal cover letter can only be completely understood by reading the narrative report, addenda, and other data, which is attached. The appraisal is subject to the attached general assumptions and limiting conditions and general service conditions. As a result of our investigation, it is our opinion that the fee simple market value of the subject, effective May 20, 2003 is: ($9,000,000) Respectfully submitted, AMERICAN APPRAISAL ASSOCIATES, INC. -s- Frank Fehribach July 16, 2003 Frank Fehribach, MAI #053272 Managing Principal, Real Estate Group Texas State Certified General Real Estate Appraiser #TX-1323954-G Report By: Shayne Hatch Texas Appraiser Trainee #TX-1330454-T AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 3 PROMONTORY POINTE, AUSTIN, TEXAS TABLE OF CONTENTS Cover Letter of Transmittal Table of Contents
APPRAISAL DATA Executive Summary ......................................................... 4 Introduction .............................................................. 9 Area Analysis ............................................................. 11 Market Analysis ........................................................... 14 Site Analysis ............................................................. 15 Improvement Analysis ...................................................... 15 Highest and Best Use ...................................................... 16 VALUATION Valuation Procedure ....................................................... 17 Sales Comparison Approach ................................................. 19 Income Capitalization Approach ............................................ 25 Reconciliation and Conclusion ............................................. 37
ADDENDA Exhibit A - Photographs of Subject Property Exhibit B - Summary of Rent Comparables and Photograph of Comparables Exhibit C - Assumptions and Limiting Conditions Exhibit D - Certificate of Appraiser Exhibit E - Qualifications General Service Conditions AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 4 PROMONTORY POINTE, AUSTIN, TEXAS EXECUTIVE SUMMARY PART ONE - PROPERTY DESCRIPTION PROPERTY NAME: Promontory Pointe LOCATION: 2250 Ridgepoint Drive Austin, Texas INTENDED USE OF ASSIGNMENT: Court Settlement PURPOSE OF APPRAISAL: "As Is" Market Value of the Fee Simple Estate INTEREST APPRAISED: Fee Simple Estate DATE OF VALUE: May 20, 2003 DATE OF REPORT: July 16, 2003 PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS: SITE: Size: 9.1 acres, or 396,396 square feet Assessor Parcel No.: 229230204 Floodplain: Community Panel No. 48453C0120E (June 16, 1993) Flood Zone X, an area outside the floodplain. Zoning: MF-3 (Multi-Family Residence-Medium Density) BUILDING: No. of Units: 252 Units Total NRA: 183,600 Square Feet Average Unit Size: 729 Square Feet Apartment Density: 27.7 units per acre Year Built: 1983 UNIT MIX AND MARKET RENT: GROSS RENTAL INCOME PROJECTION
Market Rent Square -------------------- Monthly Annual Unit Type Feet Per Unit Per SF Income Income --------- ------ -------- ------ ------- ------ 1Br/1Ba - EA10 513 $520 $1.01 $ 24,960 $ 299,520 1Br/1Ba - 1A10 699 $590 $0.84 $ 84,960 $1,019,520 2Br/2Ba - 2A20 972 $750 $0.77 $ 45,000 $ 540,000 -------- ---------- Total $154,920 $1,859,040 ======== ==========
OCCUPANCY: 85% ECONOMIC LIFE: 45 Years EFFECTIVE AGE: 20 Years REMAINING ECONOMIC LIFE: 25 Years SUBJECT PHOTOGRAPHS AND LOCATION MAP: AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 5 PROMONTORY POINTE, AUSTIN, TEXAS SUBJECT PHOTOGRAPHS [EXTERIOR - ENTRANCE PICTURE] [EXTERIOR - LANDSCAPE PICTURE] [AREA MAP] AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 6 PROMONTORY POINTE, AUSTIN, TEXAS [NEIGHBORHOOD MAP] HIGHEST AND BEST USE: As Vacant: Hold for future multi-family development As Improved: Continuation as its current use METHOD OF VALUATION: In this instance, the Sales Comparison and Income Approaches to value were utilized. AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 7 PROMONTORY POINTE, AUSTIN, TEXAS PART TWO - ECONOMIC INDICATORS
Amount $/Unit ------ ------ INCOME CAPITALIZATION APPROACH DIRECT CAPITALIZATION Potential Rental Income $ 1,859,040 $ 7,377 Effective Gross Income $ 1,712,815 $ 6,797 Operating Expenses $ 820,733 $ 3,257 47.9% of EGI Net Operating Income: $ 829,083 $ 3,290 Capitalization Rate 9.00% DIRECT CAPITALIZATION VALUE $ 9,000,000 * $35,714 / UNIT DISCOUNTED CASH FLOW ANALYSIS: Holding Period 10 years 2002 Economic Vacancy 19% Stabilized Vacancy & Collection Loss: 12% Lease-up / Stabilization Period 12 months Terminal Capitalization Rate 9.50% Discount Rate 10.50% Selling Costs 3.00% Growth Rates: Income 3.00% Expenses: 3.00% DISCOUNTED CASH FLOW VALUE $ 9,200,000 * $36,508 / UNIT RECONCILED INCOME CAPITALIZATION VALUE $ 9,100,000 $36,111 / UNIT SALES COMPARISON APPROACH PRICE PER UNIT: Range of Sales $/Unit (Unadjusted) $39,138 to $ 53,758 Range of Sales $/Unit (Adjusted) $30,527 to $ 38,383 VALUE INDICATION - PRICE PER UNIT $ 8,600,000 * $34,127 / UNIT EGIM ANALYSIS Range of EGIMs from Improved Sales 4.50 to 5.14 Selected EGIM for Subject 5.00 Subject's Projected EGI $ 1,712,815 EGIM ANALYSIS CONCLUSION $ 8,400,000 * $33,333 / UNIT NOI PER UNIT ANALYSIS CONCLUSION $ 8,100,000 * $32,143 / UNIT RECONCILED SALES COMPARISON VALUE $ 8,400,000 $33,333 / UNIT
---------------------------- * Value indications are after adjustments for concessions, deferred maintenance, excess land and lease-up costs, if any. AMERICAN APPRAISAL ASSOCIATES, INC. LETTER OF TRANSMITTAL PAGE 8 PROMONTORY POINTE, AUSTIN, TEXAS PART THREE - SUMMARY OF VALUE CONCLUSIONS SALES COMPARISON APPROACH: Price Per Unit $8,600,000 NOI Per Unit $8,100,000 EGIM Multiplier $8,400,000 INDICATED VALUE BY SALES COMPARISON $8,400,000 $33,333 / UNIT INCOME APPROACH: Direct Capitalization Method: $9,000,000 Discounted Cash Flow Method: $9,200,000 INDICATED VALUE BY THE INCOME APPROACH $9,100,000 $36,111 / UNIT RECONCILED OVERALL VALUE CONCLUSION: $9,000,000 $35,714 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9 PROMONTORY POINTE, AUSTIN, TEXAS INTRODUCTION IDENTIFICATION OF THE SUBJECT The subject property is located at 2250 Ridgepoint Drive, Austin, Travis County, Texas. Austin identifies it as 229230204. SCOPE OF THE ASSIGNMENT The property, neighborhood, and comparables were inspected by Shayne Hatch on May 20, 2003. Frank Fehribach, MAI has not made a personal inspection of the subject property. Shayne Hatch performed the research, valuation analysis and wrote the report. Frank Fehribach, MAI reviewed the report and concurs with the value. Frank Fehribach, MAI and Shayne Hatch have extensive experience in appraising similar properties and meet the USPAP competency provision. The scope of this investigation comprises the inspection of the property and the collection, verification, and analysis of general and specific data pertinent to the subject property. We have researched current improved sales and leases of similar properties, analyzing them as to their comparability, and adjusting them accordingly. We completed the Sales Comparison and Income Capitalization Approaches to value. From these approaches to value, a concluded overall value was made. DATE OF VALUE AND REPORT This appraisal was made to express the opinion of value as of May 20, 2003. The date of the report is July 16, 2003. PURPOSE AND USE OF APPRAISAL The purpose of the appraisal is to estimate the market value of the fee simple interest in the subject property. It is understood that the appraisal is intended to assist the clients in litigation settlement proceedings. The appraisal was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. PROPERTY RIGHTS APPRAISED We have appraised the Fee Simple Estate in the subject property (as applied in the Sales & Income Approaches), subject to the existing short-term leases. A Fee Simple Estate is AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10 PROMONTORY POINTE, AUSTIN, TEXAS defined in The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 1993), as: "Absolute ownership unencumbered by any other interest or estate, subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat." MARKETING/EXPOSURE PERIOD MARKETING PERIOD: 6 to 12 months EXPOSURE PERIOD: 6 to 12 months HISTORY OF THE PROPERTY Ownership in the subject property is currently vested in CPGF XXII. To the best of our knowledge, no transfers of ownership or offers to purchase the subject are known to have occurred during the past three years. AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 11 PROMONTORY POINTE, AUSTIN, TEXAS AREA / NEIGHBORHOOD ANALYSIS NEIGHBORHOOD ANALYSIS A neighborhood is a group of complementary land uses. The function of the neighborhood analysis is to describe the immediate surrounding environs. The subject is located in the city of Austin, Texas. Overall, the neighborhood is characterized as a suburban setting with the predominant land use being office. The subject's neighborhood is generally defined by the following boundaries. NEIGHBORHOOD BOUNDARIES East - Highway 290 and Springdale Road West - Cameron Road South - Highway 183 North - Ferguson Lane MAJOR EMPLOYERS Major employers in the subject's area include University of Texas, Dell Computer Corp, Motorola, Inc, City of Austin, Austin ISD HEB Grocery Co, Seton Healthcare, IBM Corp, IRS/Austin Center, Advanced Micro Devices, Solectron Texas, Round Rock ISD, Walmart Stores, Travis County Government, and Applied Materials. The overall economic outlook for the area is considered favorable. DEMOGRAPHICS We have reviewed demographic data within the neighborhood. The following table summarizes the key data points. AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 12 PROMONTORY POINTE, AUSTIN, TEXAS NEIGHBORHOOD DEMOGRAPHICS
AREA ---------------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA -------- ------------ ------------ ------------ ------------ POPULATION TRENDS Current Population 12,123 101,797 251,861 1,325,373 5-Year Population 13,653 112,935 272,657 1,519,629 % Change CY-5Y 12.6% 10.9% 8.3% 14.7% Annual Change CY-5Y 2.5% 2.2% 1.7% 2.9% HOUSEHOLDS Current Households 4,429 37,519 98,793 499,355 5-Year Projected Households 4,834 40,562 105,227 568,372 % Change CY - 5Y 9.1% 8.1% 6.5% 13.8% Annual Change CY-5Y 1.8% 1.6% 1.3% 2.8% INCOME TRENDS Median Household Income $32,086 $ 31,931 $ 33,251 $ 53,521 Per Capita Income $14,447 $ 15,850 $ 18,310 $ 25,860 Average Household Income $41,119 $ 42,940 $ 46,710 $ 68,635
Source: Demographics Now The subject neighborhood's population is expected to show increases below that of the region. The immediate market offers inferior income levels as compared to the broader market. The following table illustrates the housing statistics in the subject's immediate area, as well as the MSA region. HOUSING TRENDS
AREA ---------------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA -------- ------------ ------------ ------------ ------------ HOUSING TRENDS % of Households Renting 61.09% 54.96% 53.44% 37.39% 5-Year Projected % Renting 60.31% 54.71% 52.35% 35.82% % of Households Owning 27.18% 31.61% 35.33% 54.10% 5-Year Projected % Owning 28.60% 32.58% 36.92% 56.38%
Source: Demographics Now AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13 PROMONTORY POINTE, AUSTIN, TEXAS SURROUNDING IMPROVEMENTS The following uses surround the subject property: North - Commercial/Industrial South - Commercial/Residential East - Commercial/Industrial West - Residential CONCLUSIONS The subject is well located within the city of Austin. The neighborhood is characterized as being mostly suburban in nature and is currently in the growth stage of development. The economic outlook for the neighborhood is judged to be favorable with a good economic base. AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 14 PROMONTORY POINTE, AUSTIN, TEXAS MARKET ANALYSIS The subject property is located in the city of Austin in Travis County. The overall pace of development in the subject's market is more or less decreasing. No new construction is evident in the submarket area. The following table illustrates historical vacancy rates for the subject's market. HISTORICAL VACANCY RATE
Period Region Submarket ------ ------ --------- 4Q01 N/A 10.5% 1Q02 N/A N/A 2Q02 N/A N/A 3Q02 N/A N/A 4Q02 N/A 9.6% 1Q03 N/A 8.8%
Source: REIS Occupancy trends in the subject's market are increasing. Historically speaking, the subject's submarket has equated the overall market. Vacancy rates in the subject's submarket have slowly been decreasing since the 4th quarter 2001. As of the 1st quarter 2003, the vacancy rate has fallen to 8.8%, or a total of 1.7 percentage points since the 4th quarter of 2001. The following table illustrates a summary of the subject's competitive set. COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject --- ------------- ----- ----- ---------- -------------------- R-1 Anderson Springs 325 85% 1983 0.5 Miles R-2 Salado at Walnut Creek 290 92% 1983 0.5 Miles R-3 Penbrook Club Apartments 176 92% 1987 0.5 Miles R-4 Oakwood Austin at Cross Park 284 N/A 1998 0.5 Miles Subject Promontory Pointe 252 85% 1983
AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 15 PROMONTORY POINTE, AUSTIN, TEXAS PROPERTY DESCRIPTION SITE ANALYSIS Site Area 9.1 acres, or 396,396 square feet Shape Irregular Topography Slightly slope Utilities All necessary utilities are available to the site. Soil Conditions Stable Easements Affecting Site None other than typical utility easements Overall Site Appeal Average Flood Zone: Community Panel 48453C0120E, dated June 16, 1993 Flood Zone Zone X Zoning MF-3, the subject improvements represent a legal conforming use of the site. REAL ESTATE TAXES
ASSESSED VALUE - 2002 -------------------------------------- TAX RATE / PROPERTY PARCEL NUMBER LAND BUILDING TOTAL MILL RATE TAXES ------------- ---------- ---------- ---------- ---------- ---------- 229230204 $ 594,528 $8,769,072 $9,363,600 0.02690 $ 251,862
IMPROVEMENT ANALYSIS Year Built 1983 Number of Units 252 Net Rentable Area 183,600 Square Feet Construction: Foundation Reinforced concrete slab Frame Heavy or light wood Exterior Walls Brick or masonry Roof Composition shingle over a wood truss structure Project Amenities Amenities at the subject include a swimming pool, spa/jacuzzi, gym room, barbecue equipment, meeting hall, laundry room, business office, and secured parking. Unit Amenities Individual unit amenities include a balcony, fireplace, cable TV connection, and washer dryer connection. Appliances available in each unit include refrigerator, stove, dishwasher, garbage disposal, and oven. AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16 PROMONTORY POINTE, AUSTIN, TEXAS Unit Mix:
Unit Area Unit Type Number of Units (Sq. Ft.) --------- --------------- --------- 1Br/1Ba - EA10 48 513 1Br/1Ba - 1A10 144 699 2Br/2Ba - 2A20 60 972
Overall Condition Average Effective Age 20 years Economic Life 45 years Remaining Economic Life 25 years Deferred Maintenance None HIGHEST AND BEST USE ANALYSIS In accordance with the definition of highest and best use, an analysis of the site relating to its legal uses, physical possibilities, and financial feasibility is appropriate. The highest and best use as vacant is to hold for future multi-family development. The subject improvements were constructed in 1983 and consist of a 252-unit multifamily project. The highest and best use as improved is for a continued multifamily use. Overall, the highest and best use of the subject property is the continued use of the existing apartment project. AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 17 PROMONTORY POINTE, AUSTIN, TEXAS THE VALUATION PROCEDURE There are three traditional approaches, which can be employed in establishing the market value of the subject property. These approaches and their applicability to the valuation of the subject are summarized as follows: THE COST APPROACH The application of the Cost Approach is based on the principle of substitution. This principle may be stated as follows: no one is justified in paying more for a property than that amount by which he or she can obtain, by purchase of a site and construction of a building, without undue delay, a property of equal desirability and utility. In the case of a new building, no deficiencies in the building should exist. In the case of income-producing real estate, the cost of construction plays a minor and relatively insignificant role in determining market value. The Cost Approach is typically only a reliable indicator of value for: (a) new properties; (b) special use properties; and (c) where the cost of reproducing the improvements is easily and accurately quantified and there is no economic obsolescence. In all instances, the issue of an appropriate entrepreneurial profit - the reward for undertaking the risk of construction, remains a highly subjective factor especially in a market lacking significant speculative development. THE SALES COMPARISON APPROACH The Sales Comparison Approach is an estimate of value based upon a process of comparing recent sales of similar properties in the surrounding or competing areas to the subject property. Inherent in this approach is the principle of substitution. The application of this approach consists of comparing the subject property with similar properties of the same general type, which have been sold recently or currently are available for sale in competing areas. This comparative process involves judgment as to the similarity of the subject property and the comparable sale with respect to many value factors such as location, contract rent levels, quality of construction, reputation and prestige, age and condition, among others. The estimated value through this approach represents the probable price at which a willing seller would sell the subject property to a willing and knowledgeable buyer as of the date of value. AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 18 PROMONTORY POINTE, AUSTIN, TEXAS THE INCOME CAPITALIZATION APPROACH The theory of the Income Capitalization Approach is based on the premise that present value is the value of the cash flow and reversionary value the property will produce over a reasonable holding (ownership) period. The Discounted Cash Flow Analysis will convert equity cash flows (including cash flows and equity reversion) into a present value utilizing an internal rate of return (or discount rate). The Internal Rate of Return (IRR) will be derived from a comparison of alternate investments, a comparative analysis of IRR's used by recent buyers of similar properties, and a review of published industry surveys. The Direct Capitalization Analysis converts one year of income into an overall value using overall capitalization rates from similar sales. The overall rates take into consideration buyers assumptions of the market over the long-term. The results of the Income Capitalization Analysis are usually the primary value indicator for income producing properties. Investors expect a reasonable rate of return on their equity investment based on the ownership risks involved; this approach closely parallels the investment decision process. RECONCILIATION In this instance, we have completed the Sales Comparison and Income Capitalization Approaches to value. As an income producing property, the income approach is a primary approach to value. The Sales Comparison Approach is also considered reliable as investors are buying similar buildings in the market. Our research indicates that market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, we have decided that the Cost Approach is not a reliable indicator of value for the subject, and this approach has not been utilized. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 19 PROMONTORY POINTE, AUSTIN, TEXAS SALES COMPARISON APPROACH Use of market or comparable sales requires the collection and analysis of comparable sales data. Similar properties recently sold are compared to the subject and adjusted based on any perceived differences. This method is based on the premise that the costs of acquiring a substitute property would tend to establish a value for the subject property. The premise suggests that if a substitute is unavailable in the market, the reliability of the approach may be subordinate to the other approaches. The reliance on substitute properties produces shortcomings in the validity of this approach. Geographic and demographic characteristics from each submarket restrict which sales may be selected. Recent sales with a similar physical characteristics, income levels, and location are usually limited. The sales we have identified, however, do establish general valuation parameters as well as provide support to our conclusion derived through the income approach method. The standard unit of comparison among similar properties is the sales price per unit and price per square foot of net rentable area. To accurately adjust prices to satisfy the requirements of the sales comparison approach, numerous calculations and highly subjective judgments would be required including consideration of numerous income and expense details for which information may be unreliable or unknown. The sales price per unit and square foot are considered relevant to the investment decision, but primarily as a parameter against which value estimates derived through the income approach can be judged and compared. In examining the comparable sales, we have applied a subjective adjustment analysis, which includes specific adjustments derived from our experience and consulting with the market participants. SALES COMPARISON ANALYSIS Detailed on the following pages are sales transactions involving properties located in the subject's competitive investment market. Photographs of the sale transactions are located in the Addenda. Following the summary of sales is an adjustment grid that is used to arrive at a value. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 20 PROMONTORY POINTE, AUSTIN, TEXAS SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 I - 3 ----------- ------- ---------- ---------- ---------- Property Name Promontory Pointe Meadowood Apartments The Ridge Apartments Longspur Crossing Apartments LOCATION: Address 2250 Ridgepoint Drive 9601 Middle Fiskville 3456 N Hills Drive 701 W Longspur Boulevard Road City, State Austin, Texas Austin, TX Austin, TX Austin, TX County Travis Travis Travis Travis PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 183,600 182,080 N/a 186,424 Year Built 1983 1983 1980 1984 Number of Units 252 200 326 252 Unit Mix: Type Total Type Total Type Total Type Total 1Br/1Ba - EA10 48 1Br/1Ba 32 1Br/1Ba 30 Studio Units 32 1Br/1Ba - 1A10 144 2Br/2Ba 168 1Br/1Ba 168 1 Bedroom Units 132 2Br/2Ba - 2A20 60 2Br/2Ba 128 2 Bedroom Units 88 Average Unit Size (SF) 729 910 740 Land Area (Acre) 9.1000 9.0600 11.2600 11.1100 Density (Units/Acre) 27.7 22.1 29.0 22.7 Parking Ratio (Spaces/Unit) 1.68 1.60 2.05 N/A Parking Type (Gr., Cov., etc.) Open Open Covered, Open Open CONDITION: Average Fair Average Average APPEAL: Average Fair Average Average AMENITIES: Pool/Spa Yes/Yes Yes/No Yes/No Yes/Yes Gym Room Yes No Yes Yes Laundry Room Yes Yes Yes Yes Secured Parking Yes Yes No Yes Sport Courts Yes No No No OCCUPANCY: 85% N/A N/A N/A TRANSACTION DATA: Sale Date June, 2002 February, 2002 January, 2001 Sale Price ($) $8,535,000 $17,525,000 $10,825,000 Grantor Texas Bay Northcape EB Ridge (LP) Glenborough Fund X Limited Partners Grantee San Antonio Alt. Ridge-Austin Apartments Westdale Fanny Housing Corp. #15 (LP) (et al) Properties (Ltd) Sale Documentation 2002108317 2002029923 2001000443 Verification Jones & Jones Transwestern Westdale Fanny Enterprises, Inc Commercial Properties (Ltd) Telephone Number 512-288-8522 512-328-5600 214-515-7000 ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $0 $0 $0.00 $0 $0 $0 $0 $0.00 Vacancy/Credit Loss $0 $0 $0.00 $0 $0 $0 $0 $0.00 Effective Gross Income $0 $0 $0.00 $0 $0 $0 $0 $0.00 Operating Expenses $0 $0 $0.00 $0 $0 $0 $0 $0.00 Net Operating Income $0 $0 $0.00 $0 $0 $0 $0 $0.00 NOTES: PRICE PER UNIT $42,675 $53,758 $42,956 PRICE PER SQUARE FOOT $ 46.88 $ 58.07 EXPENSE RATIO N/A N/A N/A EGIM N/A N/A N/A OVERALL CAP RATE N/A N/A N/A Cap Rate based on Pro Forma or Actual Income? COMPARABLE COMPARABLE DESCRIPTION I - 4 I - 5 ----------- ---------- ---------- Property Name Wildwood Apartments Club Creek Apartments LOCATION: Address 7610 Cameron Road 502 W Longspur Boulevard City, State Austin, TX Austin, TX TX County Travis Travis PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 236,904 130,292 Year Built 1984 1984 Number of Units 344 160 Unit Mix: Type Total Type Total 1 Bedroom Units 312 1 Bedroom Units 52 2 Bedroom Units 32 2 Bedroom Units 108 Average Unit Size (SF) 689 814 Land Area (Acre) 12.2100 6.0400 Density (Units/Acre) 28.2 26.5 Parking Ratio (Spaces/Unit) 1.42 1.40 Parking Type (Gr., Cov., etc.) Open Covered Open CONDITION: Average Average APPEAL: Average Average AMENITIES: Pool/Spa Yes/Yes Yes/No Gym Room Yes Yes Laundry Room Yes Yes Secured Parking Yes Yes Sport Courts No No OCCUPANCY: N/A N/A TRANSACTION DATA: Sale Date November, 2000 November, 2000 Sale Price ($) $13,550,000 $6,262,000 Grantor WC Wildwood (LP) WC Wildwood (LP) Grantee WXIII/WCI Real Estate WXIII/WCI Real Estate (LP) (LP) Sale Documentation 2000181382 2000181376 Verification Oboyle Properties Oboyle Properties Telephone Number 972-934-3400 972-934-3400 ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $ 0 $ 0 $0.00 $ 0 $ 0 $ 0.00 Vacancy/Credit Loss $ 0 $ 0 $0.00 $ 0 $ 0 $ 0.00 Effective Gross Income $2,635,10 $7,660 $11.1 $1,391,51 $8,697 $10.68 Operating Expenses $1,330,00 $3,866 $5.61 $ 696,606 $4,354 $ 5.35 Net Operating Income $1,305,10 $3,794 $5.51 $ 694,904 $4,343 $ 5.33 NOTES: PRICE PER UNIT $39,390 $39,138 PRICE PER SQUARE FOOT $ 57.20 $ 48.06 EXPENSE RATIO 50.5% 50.1% EGIM 5.14 4.50 OVERALL CAP RATE 9.63% 11.10% Cap Rate based on Pro Forma or Actual Income? ACTUAL ACTUAL
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21 PROMONTORY POINTE, AUSTIN, TEXAS [IMPROVED SALES MAP] IMPROVED SALES ANALYSIS The improved sales indicate a sales price range from $39,138 to $53,758 per unit. Adjustments have been made to the sales to reflect differences in location, age/condition and quality/appeal. Generally speaking, larger properties typically have a lower price per unit when compared to smaller properties, all else being equal. Similarly, those projects with a higher average unit size will generally have a higher price per unit. After appropriate adjustments are made, the improved sales demonstrate an adjusted range for the subject from $30,527 to $38,383 per unit with a mean or average adjusted price of $35,200 per unit. The median adjusted price is $35,396 per unit. Based on the following analysis, we have concluded to a value of $35,000 per unit, which results in an "as is" value of $8,600,000 (rounded after necessary adjustment, if any). AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22 PROMONTORY POINTE, AUSTIN, TEXAS SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 ----------- ------- ---------- ---------- Property Name Promontory Pointe Meadowood Apartments The Ridge Apartments Address 2250 Ridgepoint Drive 9601 Middle Fiskville Road 3456 N Hills Drive City Austin, Texas Austin, TX Austin, TX Sale Date June, 2002 February, 2002 Sale Price ($) $8,535,000 $17,525,000 Net Rentable Area (SF) 183,600 182,080 N/a Number of Units 252 200 326 Price Per Unit $42,675 $53,758 Year Built 1983 1983 1980 Land Area (Acre) 9.1000 9.0600 11.2600 VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Date of Sale (Time) 06-2002 2% 02-2002 2% VALUE AFTER TRANS. ADJUST. ($/UNIT) $43,529 $54,833 Location Superior -20% Superior -20% Number of Units 252 200 0% 326 0% Quality / Appeal Good Inferior 5% Superior -10% Age / Condition 1983 1983 / Fair 5% 1980 / Average 0% Occupancy at Sale 85% N/A 0% N/A 0% Amenities Good Comparable 0% Comparable 0% Average Unit Size (SF) 729 910 -10% 0% PHYSICAL ADJUSTMENT -20% -30% FINAL ADJUSTED VALUE ($/UNIT) $34,823 $38,383 COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 ----------- ---------- ---------- ---------- Property Name Longspur Crossing Wildwood Apartments Club Creek Apartments Apartments Address 701 W Longspur Boulevard 7610 Cameron Road 502 W Longspur Boulevard City Austin, TX Austin, TX Austin, TX Sale Date January, 2001 November, 2000 November, 2000 Sale Price ($) $10,825,000 $13,550,000 $6,262,000 Net Rentable Area (SF) 186,424 236,904 130,292 Number of Units 252 344 160 Price Per Unit $42,956 $39,390 $39,138 Year Built 1984 1984 1984 Land Area (Acre) 11.1100 12.2100 6.0400 VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0% Date of Sale (Time) 01-2001 3% 11-2000 4% 11-2000 4% VALUE AFTER TRANS. ADJUST. ($/UNIT) $44,245 $40,965 $40,703 Location Superior -20% Comparable 0% Superior -10% Number of Units 252 0% 344 0% 160 -5% Quality / Appeal Comparable 0% Superior -10% Superior -10% Age / Condition 1984 / Average 0% 1984 / Average 0% 1984 / Average 0% Occupancy at Sale N/A 0% N/A 0% N/A 0% Amenities Comparable 0% Comparable 0% Comparable 0% Average Unit Size (SF) 740 0% 689 0% 814 0% PHYSICAL ADJUSTMENT -20% -10% -25% FINAL ADJUSTED VALUE ($/UNIT) $35,396 $36,869 $30,527
SUMMARY VALUE RANGE (PER UNIT) $30,527 TO $ 38,383 MEAN (PER UNIT) $35,200 MEDIAN (PER UNIT) $35,396 VALUE CONCLUSION (PER UNIT) $35,000 VALUE OF IMPROVEMENT & MAIN SITE $8,820,000 LESS: LEASE-UP COST -$ 65,000 PV OF CONCESSIONS -$ 137,000 VALUE INDICATED BY SALES COMPARISON APPROACH $8,618,000 ROUNDED $8,600,000
NET OPERATING INCOME (NOI) ANALYSIS We have also conducted a net operating income (NOI) comparison analysis. The NOI effectively takes into account the various physical, location, and operating aspects of the sale. When the subject's NOI is compared to the sale NOI, a percent adjustment can be arrived at. The following table illustrates this analysis. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23 PROMONTORY POINTE, AUSTIN, TEXAS
NOI PER UNIT COMPARISON ----------------------------------------------------------------------------------------------------------------------------------- COMPARABLE NO. OF SALE PRICE NOI/ SUBJECT NOI ADJUSTMENT INDICATED NO. UNITS PRICE/UNIT OAR NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT ----------------------------------------------------------------------------------------------------------------------------------- I-1 200 $ 8,535,000 N/A $ 829,083 $ 42,675 $ 3,290 I-2 326 $ 17,525,000 N/A $ 829,083 $ 53,758 $ 3,290 I-3 252 $ 10,825,000 N/A $ 829,083 $ 42,956 $ 3,290 I-4 344 $ 13,550,000 9.63% $ 1,305,106 $ 829,083 0.867 $34,158 $ 39,390 $ 3,794 $ 3,290 I-5 160 $ 6,262,000 11.10% $ 694,904 $ 829,083 0.758 $29,647 $ 39,138 $ 4,343 $ 3,290
PRICE/UNIT VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT ----------------------------------------------------------------------------------------------------------------------------------- Low High Average Median Estimated Price Per Unit $ 33,000 $29,647 $34,158 $31,903 $31,903 Number of Units 252 Value $ 8,316,000 Less: Lease-Up Cost -$ 65,000 PV of Concessions -$ 137,000 ------------ Value Based on NOI Analysis $ 8,114,000 Rounded $ 8,100,000
The adjusted sales indicate a range of value between $29,647 and $34,158 per unit, with an average of $31,903 per unit. Based on the subject's competitive position within the improved sales, a value of $33,000 per unit is estimated. This indicates an "as is" market value of $8,100,000 (rounded after necessary adjustment, if any) for the NOI Per Unit Analysis. EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS The effective gross income multiplier (EGIM) is derived by dividing the sales price by the total effective gross income. The following table illustrates the EGIMs for the comparable improved sales. AMERICAN APPRAISAL ASSOCIATES, INC SALES COMPARISON APPROACH PAGE 24 PROMONTORY POINTE, AUSTIN, TEXAS
EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON ----------------------------------------------------------------------------------------------------------------------------------- COMPARABLE NO. OF SALE PRICE EFFECTIVE OPERATING SUBJECT NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE OER PROJECTED OER EGIM ----------------------------------------------------------------------------------------------------------------------------------- I-1 200 $ 8,535,000 $ 42,675 I-2 326 $ 17,525,000 $ 53,758 I-3 252 $ 10,825,000 47.92% $ 42,956 I-4 344 $ 13,550,000 $ 2,635,106 $ 1,330,000 50.47% 5.14 $ 39,390 I-5 160 $ 6,262,000 $ 1,391,510 $ 696,606 50.06% 4.50 $ 39,138
----------------------------------------------------------------------------------------------------------------------------------- EGIM VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES ----------------------------------------------------------------------------------------------------------------------------------- Low High Average Median Estimate EGIM 5.00 --- ---- ------- ------ ------------ Subject EGI $ 1,712,815 4.50 5.14 4.82 4.82 Value $ 8,564,076 Less: Lease-Up Cost -$ 65,000 PV of Concessions -$ 137,000 ------------ Value Based on EGIM $ 8,362,076 Analysis Rounded $ 8,400,000 Value Per Unit $ 33,333
There is an inverse relationship, which generally holds among EGIMs and operating expenses. Properties, which have higher expense ratios, typically sell for relatively less and therefore produce a lower EGIM. As will be illustrated in the Income Capitalization Approach of this report, the subject's operating expense ratio (OER) is estimated at 47.92% before reserves. The comparable sales indicate a range of expense ratios from 50.06% to 50.47%, while their EGIMs range from 4.50 to 5.14. Overall, we conclude to an EGIM of 5.00, which results in an "as is" value estimate in the EGIM Analysis of $8,400,000. SALES COMPARISON CONCLUSION The three valuation methods in the Sales Comparison Approach are shown below. The overall value via the Sales Comparison Approach is estimated at $8,400,000. Price Per Unit $8,600,000 NOI Per Unit $8,100,000 EGIM Analysis $8,400,000 Sales Comparison Conclusion $8,400,000
AMERICAN APPRAISAL ASSOCIATES, INC SALES COMPARISON APPROACH PAGE 25 PROMONTORY POINTE, AUSTIN, TEXAS INCOME CAPITALIZATION APPROACH The income capitalization approach is based on the premise that value is created by the expectation of future benefits. We estimated the present value of those benefits to derive an indication of the amount that a prudent, informed purchaser-investor would pay for the right to receive them as of the date of value. This approach requires an estimate of the NOI of a property. The estimated NOI is then converted to a value indication by use of either the direct capitalization or the discounted cash flow analysis (yield capitalization). Direct capitalization uses a single year's stabilized NOI as a basis for a value indication by dividing the income by a capitalization rate. The rate chosen accounts for a recapture of the investment by the investor and should reflect all factors that influence the value of the property, such as tenant quality, property condition, neighborhood change, market trends, interest rates, and inflation. The rate may be extracted from local market transactions or, when transaction evidence is lacking, obtained from trade sources. A discounted cash flow analysis focuses on the operating cash flows expected from the property and the proceeds of a hypothetical sale at the end of a holding period (the reversion). The cash flows and reversion are discounted to their present values using a market-derived discount rate and are added together to obtain a value indication. Because benefits to be received in the future are worth less than the same benefits received in the present, this method weights income in the early years more heavily than the income and the sale proceeds to be received later. The strength of the discounted cash flow method is its ability to recognize variations in projected net income, such as those caused by inflation, stepped leases, neighborhood change, or tenant turnover. Its weakness is that it requires many judgments regarding the actions of likely buyers and sellers of the property in the future. In some situations, both methods yield a similar result. The discounted cash flow method is typically more appropriate for the analysis of investment properties with multiple or long-term leases, particularly leases with cancellation clauses or renewal options. It is especially useful for multi-tenant properties in volatile markets. The direct capitalization AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26 PROMONTORY POINTE, AUSTIN, TEXAS method is normally more appropriate for properties with relatively stable operating histories and expectations. A pro forma analysis for the first year of the investment is made to estimate a reasonable potential net operating income for the Subject Property. Such an analysis entails an estimate of the gross income the property should command in the marketplace. From this total gross income must be deducted an allowance for vacancy/collection loss and operating expenses as dictated by general market conditions and the overall character of the subject's tenancy and leased income to arrive at a projected estimate of net operating income. Conversion of the net operating income to an indication of value is accomplished by the process of capitalization, as derived primarily from market data. MARKET RENT ANALYSIS In order to determine a market rental rate for the subject, a survey of competing apartment communities was performed. This survey was displayed previously in the market analysis section of the report. Detailed information pertaining to each of the comparable rental communities, along with photographs, is presented in the Addenda of this report. The following charts display the subject's current asking and actual rent rates as well as a comparison with the previous referenced comparable rental properties.
SUMMARY OF ACTUAL AVERAGE RENTS -------------------------------------------------------------------------------- Average Unit Type Unit Area ------------------- (Sq. Ft.) Per Unit Per SF %Occupied -------------------------------------------------------------------------------- 1Br/1Ba - EA10 513 $518 $1.01 85.4% 1Br/1Ba - 1A10 699 $585 $0.84 84.0% 2Br/2Ba - 2A20 972 $711 $0.73 85.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 27 PROMONTORY POINTE, AUSTIN, TEXAS RENT ANALYSIS
SUBJECT SUBJECT DESCRIPTION SUBJECT UNIT ACTUAL ASKING TYPE RENT RENT ---------------------------------------------------------- Monthly Rent 1BR/1BA - $ 518 $ 459 EA10 Unit Area (SF) 513 513 Monthly Rent Per Sq. Ft. $ 1.01 $ 0.89 Monthly Rent 1BR/1BA - $ 585 $ 509 1A10 Unit Area (SF) 699 699 Monthly Rent Per Sq. Ft. $ 0.84 $ 0.73 Monthly Rent 2BR/2BA - $ 711 $ 689 2A20 Unit Area (SF) 972 972 Monthly Rent Per Sq. Ft. $ 0.73 $ 0.71 COMPARABLE RENTS --------------------------------------------------- R-1 R-2 R-3 R-4 --------------------------------------------------- Anderson Salado at Penbrook Oakwood Springs Walnut Club Austin at Creek Apartments Cross Park --------------------------------------------------- COMPARISON TO SUBJECT -------------------------------------------------------------------------------- DESCRIPTION Slightly Slightly Slightly Inferior Similar Inferior Inferior -------------------------------------------------------------------------------- Monthly Rent $ 539 $ 499 $ 395 $ 525 Unit Area (SF) 495 499 400 516 Monthly Rent Per Sq. Ft $ 1.09 $ 1.00 $ 0.99 $ 1.02 Monthly Rent $ 575 $ 549 $ 500 $ 650 Unit Area (SF) 703 652 700 744 Monthly Rent Per Sq. Ft $ 0.82 $ 0.84 $ 0.71 $ 0.87 Monthly Rent $ 825 $ 649 $ 675 $ 859 Unit Area (SF) 1,071 980 1,050 1,111 Monthly Rent Per Sq. Ft $ 0.77 $ 0.66 $ 0.64 $ 0.77 DESCRIPTION MIN MAX MEDIAN AVERAGE --------------------------------------------------------------------------------- Monthly Rent $ 395 $ 539 $ 512 $ 490 Unit Area (SF) 400 516 497 478 Monthly Rent Per Sq. Ft $ 0.99 $ 1.09 $ 1.01 $ 1.02 Monthly Rent $ 500 $ 650 $ 562 $ 569 Unit Area (SF) 652 744 702 700 Monthly Rent Per Sq. Ft $ 0.71 $ 0.87 $ 0.83 $ 0.81 Monthly Rent $ 649 $ 859 $ 750 $ 752 Unit Area (SF) 980 1,111 1,061 1,053 Monthly Rent Per Sq. Ft $ 0.64 $ 0.77 $ 0.72 $ 0.71
CONCLUDED MARKET RENTAL RATES AND TERMS Based on this analysis above, the subject's concluded market rental rates and gross rental income is calculated as follows:
GROSS RENTAL INCOME PROJECTION ------------------------------------------------------------------------------------------------------------------------ Market Rent Unit Area -------------------- Monthly Annual Unit Type Number of Units (Sq. Ft.) Per Unit Per SF Income Income ------------------------------------------------------------------------------------------------------------------------ 1Br/1Ba - EA10 48 513 $520 $1.01 $ 24,960 $ 299,520 1Br/1Ba - 1A10 144 699 $590 $0.84 $ 84,960 $ 1,019,520 2Br/2Ba - 2A20 60 972 $750 $0.77 $ 45,000 $ 540,000 --------- ----------- Total $ 154,920 $ 1,859,040
PRO FORMA ANALYSIS For purposes of this appraisal, we were provided with income and expense data for the subject property. A summary of this data is presented on the following page. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28 PROMONTORY POINTE, AUSTIN, TEXAS SUMMARY OF HISTORICAL INCOME & EXPENSES
FISCAL YEAR 2000 FISCAL YEAR 2001 FISCAL YEAR 2002 ------------------------------------------------------------------------------------- ACTUAL ACTUAL ACTUAL ------------------------------------------------------------------------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT ----------------------------------------------------------------------------------------------------------------------- Revenues Rental Income $2,053,172 $ 8,148 $2,197,696 $ 8,721 $2,010,245 $ 7,977 Vacancy $ 92,179 $ 366 $ 217,457 $ 863 $ 255,872 $ 1,015 Credit Loss/Concessions $ 44,690 $ 177 $ 148,951 $ 591 $ 117,875 $ 468 ------------------------------------------------------------------------------------- Subtotal $ 136,869 $ 543 $ 366,408 $ 1,454 $ 373,747 $ 1,483 Laundry Income $ 0 $ 0 $ 10,759 $ 43 $ 13,958 $ 55 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 134,885 $ 535 $ 52,072 $ 207 $ 60,162 $ 239 ------------------------------------------------------------------------------------- Subtotal Other Income $ 134,885 $ 535 $ 62,831 $ 249 $ 74,120 $ 294 ------------------------------------------------------------------------------------- Effective Gross Income $2,051,188 $ 8,140 $1,894,119 $ 7,516 $1,710,618 $ 6,788 Operating Expenses Taxes $ 314,003 $ 1,246 $ 233,254 $ 926 $ 274,648 $ 1,090 Insurance $ 20,815 $ 83 $ 40,826 $ 162 $ 64,502 $ 256 Utilities $ 57,253 $ 227 $ 68,651 $ 272 $ 58,122 $ 231 Repair & Maintenance $ 33,948 $ 135 $ 32,616 $ 129 $ 27,399 $ 109 Cleaning $ 41,836 $ 166 $ 73,380 $ 291 $ 67,514 $ 268 Landscaping $ 45,467 $ 180 $ 61,759 $ 245 $ 63,647 $ 253 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 49,893 $ 198 $ 47,779 $ 190 $ 34,564 $ 137 General Administrative $ 186,679 $ 741 $ 241,990 $ 960 $ 208,474 $ 827 Management $ 104,218 $ 414 $ 102,599 $ 407 $ 89,220 $ 354 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------------------------- Total Operating Expenses $ 854,112 $ 3,389 $ 902,854 $ 3,583 $ 888,090 $ 3,524 Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------------------------- Net Income $1,197,076 $ 4,750 $ 991,265 $ 3,934 $ 822,528 $ 3,264 ------------------------------------------------------------------------------------- FISCAL YEAR 2003 ANNUALIZED 2003 ------------------------------------------------------ MANAGEMENT BUDGET PROJECTION AAA PROJECTION ------------------------------------------------------------------------------------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT % ----------------------------------------------------------------------------------------------------------------------------------- Revenues Rental Income $1,883,064 $ 7,472 $1,841,344 $ 7,307 $1,859,040 $ 7,377 100.0% Vacancy $ 90,924 $ 361 $ 209,292 $ 831 $ 148,723 $ 590 8.0% Credit Loss/Concessions $ 78,000 $ 310 $ 59,928 $ 238 $ 74,362 $ 295 4.0% ------------------------------------------------------------------------------------------------- Subtotal $ 168,924 $ 670 $ 269,220 $ 1,068 $ 223,085 $ 885 12.0% Laundry Income $ 12,516 $ 50 $ 14,908 $ 59 $ 13,860 $ 55 0.7% Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% Other Misc. Revenue $ 63,264 $ 251 $ 56,296 $ 223 $ 63,000 $ 250 3.4% ------------------------------------------------------------------------------------------------- Subtotal Other Income $ 75,780 $ 301 $ 71,204 $ 283 $ 76,860 $ 305 4.1% ------------------------------------------------------------------------------------------------- Effective Gross Income $1,789,920 $ 7,103 $1,643,328 $ 6,521 $1,712,815 $ 6,797 100.0% Operating Expenses Taxes $ 277,435 $ 1,101 $ 298,460 $ 1,184 $ 226,800 $ 900 13.2% Insurance $ 63,218 $ 251 $ 62,428 $ 248 $ 63,000 $ 250 3.7% Utilities $ 86,076 $ 342 $ 57,564 $ 228 $ 60,480 $ 240 3.5% Repair & Maintenance $ 30,528 $ 121 $ 27,352 $ 109 $ 31,500 $ 125 1.8% Cleaning $ 65,604 $ 260 $ 34,284 $ 136 $ 68,040 $ 270 4.0% Landscaping $ 61,248 $ 243 $ 70,880 $ 281 $ 63,000 $ 250 3.7% Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% Marketing & Leasing $ 32,280 $ 128 $ 26,740 $ 106 $ 37,800 $ 150 2.2% General Administrative $ 183,132 $ 727 $ 189,928 $ 754 $ 201,600 $ 800 11.8% Management $ 91,943 $ 365 $ 89,524 $ 355 $ 68,513 $ 272 4.0% Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% ------------------------------------------------------------------------------------------------- Total Operating Expenses $ 891,464 $ 3,538 $ 857,160 $ 3,401 $ 820,733 $ 3,257 47.9% Reserves $ 0 $ 0 $ 0 $ 0 $ 63,000 $ 250 7.7% ------------------------------------------------------------------------------------------------- Net Income $ 898,456 $ 3,565 $ 786,168 $ 3,120 $ 829,083 $ 3,290 48.4% -------------------------------------------------------------------------------------------------
REVENUES AND EXPENSES The subject's revenue and expense projections are displayed on the previous chart. Rental income is based on the market analysis previously discussed. Other income consists of forfeited deposits, laundry income, late rent payments, month to month fees, pet fees, vending machine revenue, etc. We forecasted the property's annual operating expenses after reviewing its historical performance at the subject property. We analyzed each item of expense and attempted to forecast amounts a typical informed investor would consider reasonable. VACANCY AND COLLECTION LOSS An investor is primarily interested in the annual revenue an income property is likely to produce over a specified period of time, rather than the income it could produce if it were always 100% occupied and all tenants were paying their rent in full and on time. An investor normally expects some income loss as tenants vacate, fail to pay rent, or pay their rent late. We have projected a stabilized vacancy and collection loss rate of 12% based on the subject's historical performance, as well as the anticipated future market conditions. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29 PROMONTORY POINTE, AUSTIN, TEXAS RESERVES FOR REPLACEMENT "Reserves for replacements" is a contingency account allocated to the expenses of the property to provide for replacement of short-lived items and for unforeseen necessary capital expenditures. We have utilized the Korpacz Real Estate Investor Survey of the national apartment market, which reports a range of replacement reserves between $150 and $400 per unit. For purposes of this analysis, we have included an allowance of $250 per unit for reserves for replacement. CAPITAL EXPENDITURES Capital expenditures represent expenses for immediate repair or replacement of items that have average to long lives. Based on our inspection of the property as well as discussions with property management personnel, there are no major items remaining in need of repair or replacement that would require an expense beyond our reserves for replacement. Therefore an allowance of $250 per unit should be satisfactory in our reserves for replacement to cover future capital expenditures. DISCOUNTED CASH FLOW ANALYSIS As the subject is a multi-tenant income property, the Discounted Cash Flow Method is considered appropriate. This method is especially meaningful in that it isolates the timing of the annual cash flows and discounts them, along with the expected equity reversion, to a present value. The present value of the cash flow is added to the present value of the reversion, resulting in a total property value. INVESTMENT CRITERIA Appropriate investment criteria will be derived for the subject based upon analysis of comparable sales and a survey of real estate investors. The following table summarizes the findings of Korpacz National Investor Survey for the most recent period. KORPACZ NATIONAL INVESTOR SURVEY 1ST QUARTER 2003 NATIONAL APARTMENT MARKET
CAPITALIZATION RATES ------------------------------------------------- GOING-IN TERMINAL -------------------- ------------------ LOW HIGH LOW HIGH ---- ----- ---- ---- RANGE 6.00% 10.00% 7.00% 10.00% AVERAGE 8.14% 8.47%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 30 PROMONTORY POINTE, AUSTIN, TEXAS SUMMARY OF OVERALL CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR -------------------------------------------------------------------------------- I-1 Jun-02 N/A $42,675 N/A I-2 Feb-02 N/A $53,758 N/A I-3 Jan-01 N/A $42,956 N/A I-4 Nov-00 N/A $39,390 9.63% I-5 Nov-00 N/A $39,138 11.10% High 11.10% Low 9.63% Average 10.37%
Based on this information, we have concluded the subject's overall capitalization rate should be 9.00%. The terminal capitalization rate is applied to the net operating income estimated for the year following the end of the holding period. Based on the concluded overall capitalization rate, the age of the property and the surveyed information, we have concluded the subject's terminal capitalization rate to be 9.50%. Finally, the subject's discount rate or yield rate is estimated based on the previous investor survey and an examination of returns available on alternative investments in the market. Based on this analysis, the subject's discount rate is estimated to be 10.50%. HOLDING PERIOD The survey of investors indicates that most investors are completing either 10-year cash flows or extending the analysis to the end of the lease if it is more than 10-years. A 10-year period has been used in the analysis of the subject with the eleventh year stabilized NOI used to determine the reversion. SELLING COSTS Sales of similar size properties are typically accomplished with the aid of a broker and will also incur legal and other transaction related cost. Based on our survey of brokers and a review of institutional investor projections, an allowance of 3.00% of the sale amount is applied. DISCOUNTED CASH FLOW CONCLUSION Discounting the annual cash flows and the equity reversion at the selected rate of 10.50% indicates a value of $9,200,000. In this instance, the reversion figure contributes AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31 PROMONTORY POINTE, AUSTIN, TEXAS approximately 42% of the total value. Investors surveyed for this assignment indicated they would prefer to have the cash flow contribute anywhere from 50% to 60%. Overall, the blend seems reasonable. The cash flow and pricing matrix are located on the following pages. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32 PROMONTORY POINTE, AUSTIN, TEXAS DISCOUNTED CASH FLOW ANALYSIS
PROMONTORY POINTE ----------------------------------------------------------------------------------------------------------------------------------- YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009 FISCAL YEAR 1 2 3 4 5 6 ----------------------------------------------------------------------------------------------------------------------------------- REVENUE Base Rent $1,859,040 $1,859,040 $1,896,221 $1,953,107 $2,011,701 $2,072,052 Vacancy $ 224,007 $ 148,723 $ 151,698 $ 156,249 $ 160,936 $ 165,764 Credit Loss $ 74,362 $ 74,362 $ 75,849 $ 78,124 $ 80,468 $ 82,882 Concessions $ 55,771 $ 55,771 $ 37,924 $ 19,531 $ 0 $ 0 ----------------------------------------------------------------------------------------- Subtotal $ 354,140 $ 278,856 $ 265,471 $ 253,904 $ 241,404 $ 248,646 Laundry Income $ 13,860 $ 13,860 $ 14,137 $ 14,561 $ 14,998 $ 15,448 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 63,000 $ 63,000 $ 64,260 $ 66,188 $ 68,173 $ 70,219 ----------------------------------------------------------------------------------------- Subtotal Other Income $ 76,860 $ 76,860 $ 78,397 $ 80,749 $ 83,172 $ 85,667 ----------------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME $1,581,760 $1,657,044 $1,709,147 $1,779,953 $1,853,468 $1,909,072 OPERATING EXPENSES: Taxes $ 226,800 $ 233,604 $ 240,612 $ 247,830 $ 255,265 $ 262,923 Insurance $ 63,000 $ 64,890 $ 66,837 $ 68,842 $ 70,907 $ 73,034 Utilities $ 60,480 $ 62,294 $ 64,163 $ 66,088 $ 68,071 $ 70,113 Repair & Maintenance $ 31,500 $ 32,445 $ 33,418 $ 34,421 $ 35,454 $ 36,517 Cleaning $ 68,040 $ 70,081 $ 72,184 $ 74,349 $ 76,580 $ 78,877 Landscaping $ 63,000 $ 64,890 $ 66,837 $ 68,842 $ 70,907 $ 73,034 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 37,800 $ 38,934 $ 40,102 $ 41,305 $ 42,544 $ 43,821 General Administrative $ 201,600 $ 207,648 $ 213,877 $ 220,294 $ 226,903 $ 233,710 Management $ 63,270 $ 66,282 $ 68,366 $ 71,198 $ 74,139 $ 76,363 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES $ 815,490 $ 841,068 $ 866,396 $ 893,169 $ 920,769 $ 948,392 Reserves $ 63,000 $ 64,890 $ 66,837 $ 68,842 $ 70,907 $ 73,034 ----------------------------------------------------------------------------------------- NET OPERATING INCOME $ 703,270 $ 751,086 $ 775,914 $ 817,942 $ 861,792 $ 887,646 ----------------------------------------------------------------------------------------- Operating Expense Ratio (% of EGI) 51.6% 50.8% 50.7% 50.2% 49.7% 49.7% Operating Expense Per Unit $ 3,236 $ 3,338 $ 3,438 $ 3,544 $ 3,654 $ 3,763 YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014 FISCAL YEAR 7 8 9 10 11 ----------------------------------------------------------------------------------------------------------------- REVENUE Base Rent $2,134,213 $2,198,240 $2,264,187 $2,332,112 $2,402,076 Vacancy $ 170,737 $ 175,859 $ 181,135 $ 186,569 $ 192,166 Credit Loss $ 85,369 $ 87,930 $ 90,567 $ 93,284 $ 96,083 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------- Subtotal $ 256,106 $ 263,789 $ 271,702 $ 279,853 $ 288,249 Laundry Income $ 15,912 $ 16,389 $ 16,881 $ 17,387 $ 17,909 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 72,325 $ 74,495 $ 76,730 $ 79,032 $ 81,403 ----------------------------------------------------------------------- Subtotal Other Income $ 88,237 $ 90,884 $ 93,610 $ 96,419 $ 99,311 ----------------------------------------------------------------------- EFFECTIVE GROSS INCOME $1,966,344 $2,025,335 $2,086,095 $2,148,678 $2,213,138 OPERATING EXPENSES: Taxes $ 270,811 $ 278,935 $ 287,303 $ 295,923 $ 304,800 Insurance $ 75,225 $ 77,482 $ 79,807 $ 82,201 $ 84,667 Utilities $ 72,216 $ 74,383 $ 76,614 $ 78,913 $ 81,280 Repair & Maintenance $ 37,613 $ 38,741 $ 39,903 $ 41,100 $ 42,333 Cleaning $ 81,243 $ 83,681 $ 86,191 $ 88,777 $ 91,440 Landscaping $ 75,225 $ 77,482 $ 79,807 $ 82,201 $ 84,667 Security $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 45,135 $ 46,489 $ 47,884 $ 49,320 $ 50,800 General Administrative $ 240,721 $ 247,943 $ 255,381 $ 263,042 $ 270,934 Management $ 78,654 $ 81,013 $ 83,444 $ 85,947 $ 88,526 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------- TOTAL OPERATING EXPENSES $ 976,844 $1,006,149 $1,036,334 $1,067,424 $1,099,446 Reserves $ 75,225 $ 77,482 $ 79,807 $ 82,201 $ 84,667 ----------------------------------------------------------------------- NET OPERATING INCOME $ 914,275 $ 941,704 $ 969,955 $ 999,053 $1,029,025 Operating Expense Ratio (% of EGI) 49.7% 49.7% 49.7% 49.7% 49.7% Operating Expense Per Unit $ 3,876 $ 3,993 $ 4,112 $ 4,236 $ 4,363
"DCF" VALUE ANALYSIS Gross Residual Sale Deferred Price $10,831,841 Maintenance $ 0 Estimated Stabilized NOI $829,083 Sales Expense Rate 3.00% Less: Sales Expense $ 324,955 Add: Excess Land $ 0 Months to Stabilized 12 Discount Rate 10.50% Net Residual Sale Price $10,506,886 Other Adjustments $ 0 Stabilized Occupancy 92.0% Terminal Cap Rate 9.50% PV of Reversion $ 3,871,250 Value Indicated By "DCF" $9,241,517 Add: NPV of NOI $ 5,370,266 Rounded $9,200,000 PV Total $ 9,241,517
"DCF" VALUE SENSITIVITY TABLE TOTAL VALUE DISCOUNT RATE ------------------------------------------------------------------------------------------------------------- 10.00% 10.25% 10.50% 10.75% 11.00% 9.00% $9,779,434 $9,616,209 $9,456,586 $9,300,473 $9,147,782 9.25% $9,663,869 $9,503,238 $9,346,145 $9,192,500 $9,042,216 9.50% $9,554,387 $9,396,213 $9,241,517 $9,090,210 $8,942,206 TERMINAL CAP RATE 9.75% $9,450,518 $9,294,676 $9,142,254 $8,993,165 $8,847,325 10.00% $9,351,844 $9,198,216 $9,047,954 $8,900,972 $8,757,188
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33 PROMONTORY POINTE, AUSTIN, TEXAS INCOME LOSS DURING LEASE-UP The subject is currently 85% occupied, below our stabilized occupancy projection. We have estimated a 12-month lease-up period. An adjustment must be made to bring the subject to a stabilized operating level. To account for this income loss during lease-up, we have compared the current DCF analysis to an "as stabilized" DCF analysis assuming the subject's occupancy were stabilized. The difference in net operating income during the lease-up period is discounted to a present value figure of $65,000 as shown in the following table.
DESCRIPTION YEAR 1 -------------------------------------------------- "As Is" Net Operating Income $703,270 Stabilized Net Operating Income $775,542 -------- Difference $72,272 PV of Income Loss During Lease-Up $65,405 -------- Rounded $65,000
CONCESSIONS Due to softness in the market, concessions have been utilized at the subject property and within the market. Based on our discussions with the subject's property manager and those at competing properties, these concessions are expected to continue in the near term until the market returns to a stabilized level. Concessions have been included as a line item deduction within the discounted cash flow analysis. The present value of these concessions equates to $137,000 (rounded). This amount has been deducted from the Direct Capitalization analysis, as well as the Sales Comparison Approach value. DIRECT CAPITALIZATION METHOD After having projected the income and expenses for the property, the next step in the valuation process is to capitalize the net income into an estimate of value. The selected overall capitalization rate ("OAR") covers both return on and return of capital. It is the overall rate of return an investor expects. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 34 PROMONTORY POINTE, AUSTIN, TEXAS After considering the market transactions and the investor surveys, we previously conclude that an overall rate of 9.00% percent is applicable to the subject. The results of our direct capitalization analysis are as follows: AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35 PROMONTORY POINTE, AUSTIN, TEXAS
PROMONTORY POINTE TOTAL PER SQ. FT. PER UNIT %OF EGI ------------------------------------------------------------------------------------------------------------------- REVENUE Base Rent $ 1,859,040 $ 10.13 $ 7,377 Less: Vacancy & Collection Loss 12.00% $ 223,085 $ 1.22 $ 885 Plus: Other Income Laundry Income $ 13,860 $ 0.08 $ 55 0.81% Garage Revenue $ 0 $ 0.00 $ 0 0.00% Other Misc. Revenue $ 63,000 $ 0.34 $ 250 3.68% -------------------------------------------------- Subtotal Other Income $ 76,860 $ 0.42 $ 305 4.49% EFFECTIVE GROSS INCOME $ 1,712,815 $ 9.33 $ 6,797 OPERATING EXPENSES: Taxes $ 226,800 $ 1.24 $ 900 13.24% Insurance $ 63,000 $ 0.34 $ 250 3.68% Utilities $ 60,480 $ 0.33 $ 240 3.53% Repair & Maintenance $ 31,500 $ 0.17 $ 125 1.84% Cleaning $ 68,040 $ 0.37 $ 270 3.97% Landscaping $ 63,000 $ 0.34 $ 250 3.68% Security $ 0 $ 0.00 $ 0 0.00% Marketing & Leasing $ 37,800 $ 0.21 $ 150 2.21% General Administrative $ 201,600 $ 1.10 $ 800 11.77% Management 4.00% $ 68,513 $ 0.37 $ 272 4.00% Miscellaneous $ 0 $ 0.00 $ 0 0.00% TOTAL OPERATING EXPENSES $ 820,733 $ 4.47 $ 3,257 47.92% Reserves $ 63,000 $ 0.34 $ 250 3.68% -------------------------------------------------- NET OPERATING INCOME $ 829,083 $ 4.52 $ 3,290 48.40% "GOING IN" CAPITALIZATION RATE 9.00% VALUE INDICATION $ 9,212,029 $50.17 $36,556 LESS: LEASE-UP COST ($65,000) PV OF CONCESSIONS ($137,000) "AS IS" VALUE INDICATION (DIRECT CAPITALIZATION APPROACH) $9,010,029 ROUNDED $9,000,000 $49.02 $35,714
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36 PROMONTORY POINTE, AUSTIN, TEXAS DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF --------- ---------- ---------- ---------- ---------- 8.25% $9,847,486 $9,800,000 $38,889 $53.38 8.50% $9,551,913 $9,600,000 $38,095 $52.29 8.75% $9,273,230 $9,300,000 $36,905 $50.65 9.00% $9,010,029 $9,000,000 $35,714 $49.02 9.25% $8,761,055 $8,800,000 $34,921 $47.93 9.50% $8,525,185 $8,500,000 $33,730 $46.30 9.75% $8,301,411 $8,300,000 $32,937 $45.21
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD Applying the capitalization rate to our estimated NOI results in an estimated value of $9,000,000. CORRELATION AND CONCLUSION BY THE INCOME APPROACH The two methods used to estimate the market value of the subject property by the income approach resulted in the following indications of value: Discounted Cash Flow Analysis $9,200,000 Direct Capitalization Method $9,000,000
Giving consideration to the indicated values provided by both techniques, we have concluded the estimated value by the income capitalization approach to be $9,100,000. AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 37 PROMONTORY POINTE, AUSTIN, TEXAS RECONCILIATION AND CONCLUSION This appraisal was made to express an opinion as of the Market Value of the fee simple estate in the property. AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE
Cost Approach Not Utilized Sales Comparison Approach $8,400,000 Income Approach $9,100,000 Reconciled Value $9,000,000
The Income Capitalization Method is considered a reliable indicator of value. Income and expenses were estimated and projected based on historical operating statements and market oriented expenses. This method is primarily used by investors in their underwriting analysis. Furthermore, there was good support for an overall rate in the Direct Capitalization Method. The Sales Comparison Approach to value supported the value conclusion by the Income Approach and was given secondary consideration. Investment-grade, income-producing properties such as the subject are not typically traded based on cost. Therefore, the Cost Approach has not been considered in our valuation. FINAL VALUE - FEE SIMPLE ESTATE Based on the investigation and premise outlined, it is our opinion that as of May 20, 2003 the market value of the fee simple estate in the property is: $9,000,000 AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA PROMONTORY POINTE, AUSTIN, TEXAS ADDENDA AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A PROMONTORY POINTE, AUSTIN, TEXAS EXHIBIT A SUBJECT PHOTOGRAPHS AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A PROMONTORY POINTE, AUSTIN, TEXAS SUBJECT PHOTOGRAPHS [EXTERIOR - ENTRANCE PICTURE] [EXTERIOR - LANDSCAPE PICTURE] [EXTERIOR - PARKING LOT PICTURE] [INTERIOR - KITCHEN PICTURE] [INTERIOR - LIVING ROOM PICTURE] [INTERIOR - LIVING ROOM PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A PROMONTORY POINTE, AUSTIN, TEXAS SUBJECT PHOTOGRAPHS [EXTERIOR - BUILDING PICTURE] [EXTERIOR - APARTMENT UNIT PICTURE] [EXTERIOR - POOL AREA PICTURE] [EXTERIOR - LEASING OFFICE PICTURE] [INTERIOR - BATHROOM PICTURE] [INTERIOR - ENTRANCE AND LIVING AREA PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PROMONTORY POINTE, AUSTIN, TEXAS EXHIBIT B SUMMARY OF RENT COMPARABLES AND PHOTOGRAPH OF COMPARABLES AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PROMONTORY POINTE, AUSTIN, TEXAS PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3 MEADOWOOD APARTMENTS THE RIDGE APARTMENTS LONGSPUR CROSSING APARTMENTS 9601 Middle Fiskville Road 3456 N Hills Drive 701 W Longspur Boulevard Austin, TX Austin, TX Austin, TX [PICTURE] [PICTURE] [PICTURE] COMPARABLE I-4 COMPARABLE I-5 WILDWOOD APARTMENTS CLUB CREEK APARTMENTS 7610 Cameron Road 502 W Longspur Boulevard Austin, TX Austin, TX [PICTURE] [PICTURE] N/A
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PROMONTORY POINTE, AUSTIN, TEXAS SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE DESCRIPTION SUBJECT R - 1 --------------------------------------------------------------------------------------------------------------------------------- Property Name Promontory Pointe Anderson Springs Management Company AIMCO Alliance Residential --------------------------------------------------------------------------------------------------------------------------------- LOCATION: --------------------------------------------------------------------------------------------------------------------------------- Address 2250 Ridgepoint Drive 1901 East Anderson Lane City, State Austin, Texas Austin, TX County Travis Travis Proximity to Subject 0.5 Miles --------------------------------------------------------------------------------------------------------------------------------- PHYSICAL CHARACTERISTICS: --------------------------------------------------------------------------------------------------------------------------------- Net Rentable Area (SF) 183,600 N/A Year Built 1983 1983 Effective Age 20 20 Building Structure Type Brick/Siding Stucco/Wood Parking Type Open Open Parking (Gr., Cov., etc.) --------------------------------------------------------------------------------------------------------------------------------- Number of Units 252 325 --------------------------------------------------------------------------------------------------------------------------------- Unit Mix: Type Unit Qty. Mo. Rent Type Unit Qty. Mo. 1 1Br/1Ba - EA10 513 48 $518 1 1Br/1Ba- 1A 495 $539 2 1Br/1Ba - 1A10 699 144 $585 1Br/1Ba- 1B 560 $569 3 2Br/2Ba - 2A20 972 60 $711 2 1Br/1Ba- 1C 703 $575 1Br/1Ba- 1D 786 $659 2Br/2Ba- 2A 943 $739 3 2Br/2Ba- 2B 1,071 $825 2Br/2Ba- 2C 1,296 $989 --------------------------------------------------------------------------------------------------------------------------------- Average Unit Size (SF) 729 Unit Breakdown: Efficiency 0% 2-Bedroom 24% Efficiency N/A 2-Bedroom N/A 1-Bedroom 76% 3-Bedroom 0% 1-Bedroom N/A 3-Bedroom N/A CONDITION: Average Fair APPEAL: Average Average --------------------------------------------------------------------------------------------------------------------------------- AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling X Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. X Balcony X W/D Connect. X Fireplace X Fireplace X Cable TV Ready X Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool ------------------------------------------------------------------------------------------------------ X Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash Basketball Court X BBQ Equipment Basketball Court X BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball X Meeting Hall Sand Volley Ball Meeting Hall Tennis Court X Secured Parking Tennis Court Secured Parking ------------------------------------------------------------------------------------------------------ Racquet Ball X Laundry Room Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track X Business Office X Gym Room X Gym Room --------------------------------------------------------------------------------------------------------------------------------- OCCUPANCY: 85% 85% LEASING DATA: Available Leasing Terms 6 to 12 6,9,12 Months Concessions $200 off 1st month and 99 Reduced Rent $100 to $150 deposit Pet Deposit $300 Utilities Paid by Tenant: X Electric Natural Gas X Electric X Natural Gas X Water Trash X Water X Trash ------------------------------------------------------------------------------------------------------ Confirmation Jessica Cordero Misty Telephone Number 512-929-3320 866-762-5543 --------------------------------------------------------------------------------------------------------------------------------- NOTES: --------------------------------------------------------------------------------------------------------------------------------- COMPARISON TO SUBJECT: Slightly Inferior --------------------------------------------------------------------------------------------------------------------------------- COMPARABLE COMPARABLE DESCRIPTION R - 2 R - 3 ------------------------------------------------------------------------------------------------------------------------------------ Property Name Salado at Walnut Creek Penbrook Club Apartments Management Company N/A Carlisle Apartments Inc. ------------------------------------------------------------------------------------------------------------------------------------ LOCATION: ------------------------------------------------------------------------------------------------------------------------------------ Address 2104 E Anderson Lane 7227 Highway 290 East City, State Austin, TX Austin, TX County Travis Travis Proximity to Subject 0.5 Miles 0.5 Miles ------------------------------------------------------------------------------------------------------------------------------------ PHYSICAL CHARACTERISTICS: ------------------------------------------------------------------------------------------------------------------------------------ Net Rentable Area (SF) N/A N/A Year Built 1983 1987 Effective Age 20 16 Building Structure Type Brick/Wood Wood/Brick Parking Type Open Parking Open Parking (Gr., Cov., etc.) ------------------------------------------------------------------------------------------------------------------------------------ Number of Units 290 176 ------------------------------------------------------------------------------------------------------------------------------------ Unit Mix: Type Unit Qty. Mo. Type Unit Qty. Mo. 1 1Br/1Ba- A1 499 $499 1 1Br/1Ba- 1A 400 $395 1Br/1Ba- A2 604 $499 2 1Br/1Ba- 1B 700 $500 2 1Br/1Ba- A3 652 $549 2Br/1Ba- 2A 960 $625 2Br/1Ba- B1 782 $599 3 2Br/2Ba- 2B 1,050 $675 3 2Br/2Ba-B2 980 $649 2Br/2Ba- B2-1 990 $649 2Br/2Ba- B3 1,043 $699 ------------------------------------------------------------------------------------------------------------------------------------ Average Unit Size (SF) Unit Breakdown: Efficiency N/A 2-Bedroom N/A Efficiency N/A 2-Bedroom N/A 1-Bedroom N/A 3-Bedroom N/A 1-Bedroom N/A 3-Bedroom N/A CONDITION: Average Average APPEAL: Average Average ------------------------------------------------------------------------------------------------------------------------------------ AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. X Balcony X W/D Connect. X Fireplace X Fireplace X Cable TV Ready X Cable TV Ready Project Amenities X Swimming Pool X Swimming Pool ------------------------------------------------------------------------------------------------------ Spa/Jacuzzi Car Wash Spa/Jacuzzi Car Wash Basketball Court BBQ Equipment Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room X Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall Tennis Court Secured Parking Tennis Court Secured Parking ------------------------------------------------------------------------------------------------------ Racquet Ball X Laundry Room Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track X Business Office X Gym Room X Gym Room ------------------------------------------------------------------------------------------------------------------------------------ OCCUPANCY: 92% 92% LEASING DATA: Available Leasing Terms 6 to 12 months 6, 9, 12 months Concessions Lowered Rents None Pet Deposit $400 N/A Utilities Paid by Tenant: X Electric Natural Gas X Electric Natural Gas X Water Trash Water Trash ------------------------------------------------------------------------------------------------------ Confirmation Mike Maria Telephone Number 888-665-0083 512-929-3150 ------------------------------------------------------------------------------------------------------------------------------------ NOTES: ------------------------------------------------------------------------------------------------------------------------------------ COMPARISON TO SUBJECT: Similar Slightly Inferior ------------------------------------------------------------------------------------------------------------------------------------ COMPARABLE DESCRIPTION R - 4 -------------------------------------------------------------------------------- Property Name Oakwood Austin at Cross Park Management Company N/A -------------------------------------------------------------------------------- LOCATION: -------------------------------------------------------------------------------- Address 8054 Exchange Drive City, State Austin, TX County Travis Proximity to Subject 0.5 Miles -------------------------------------------------------------------------------- PHYSICAL CHARACTERISTICS: -------------------------------------------------------------------------------- Net Rentable Area (SF) N/A Year Built 1998 Effective Age 5 Building Structure Type Stucco Parking Type Covered/Open (Gr., Cov., etc.) -------------------------------------------------------------------------------- Number of Units 284 -------------------------------------------------------------------------------- Unit Mix: Type Unit Qty. Mo. 1 1Br/1Ba- 1A 516 $525 2 1Br/1Ba- 1B 744 $650 1Br/1Ba- 1C 772 $675 3 2Br/2Ba- 2A 1,111 $859 2Br/2Ba- 2B 1,148 $859 -------------------------------------------------------------------------------- Average Unit Size (SF) Unit Breakdown: Efficiency N/A 2-Bedroom N/A 1-Bedroom N/A 3-Bedroom N/A CONDITION: APPEAL: -------------------------------------------------------------------------------- AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. X Fireplace X Cable TV Ready Project Amenities X Swimming Pool -------------------------------------------------- Spa/Jacuzzi Car Wash Basketball Court BBQ Equipment Volleyball Court Theater Room Sand Volley Ball Meeting Hall Tennis Court Secured Parking -------------------------------------------------- Racquet Ball X Laundry Room Jogging Track X Business Office X Gym Room -------------------------------------------------------------------------------- OCCUPANCY: N/A LEASING DATA: Available Leasing Terms 3 to 12 months Concessions $125 to $200 Pet Deposit N/A Utilities Paid by Tenant: X Electric X Natural Gas X Water X Trash -------------------------------------------------- Confirmation Mindy Telephone Number 866-231-5537 -------------------------------------------------------------------------------- NOTES: -------------------------------------------------------------------------------- COMPARISON TO SUBJECT: Slightly Inferior --------------------------------------------------------------------------------
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B PROMONTORY POINTE, AUSTIN, TEXAS PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3 ANDERSON SPRINGS SALADO AT WALNUT CREEK PENBROOK CLUB APARTMENTS 1901 East Anderson Lane 2104 E Anderson Lane 7227 Highway 290 East Austin, TX Austin, TX Austin, TX [PICTURE] [PICTURE] N/A COMPARABLE R-4 OAKWOOD AUSTIN AT CROSS PARK 8054 Exchange Drive Austin, TX N/A N/A AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PROMONTORY POINTE, AUSTIN, TEXAS EXHIBIT C ASSUMPTIONS AND LIMITING CONDITIONS (3 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PROMONTORY POINTE, AUSTIN, TEXAS No responsibility is assumed for matters legal in nature. No investigation has been made of the title to or any liabilities against the property appraised. In this appraisal, it is presumed that, unless otherwise noted, the owner's claim is valid, the property rights are good and marketable, and there are no encumbrances which cannot be cleared through normal processes. To the best of our knowledge, all data set forth in this report are true and accurate. Although gathered from reliable sources, no guarantee is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others which have been used in formulating this analysis. Land areas and descriptions used in this appraisal were obtained from public records and have not been verified by legal counsel or a licensed surveyor. No soil analysis or geological studies were ordered or made in conjunction with this report, nor were any water, oil, gas, or other subsurface mineral and use rights or conditions investigated. Substances such as asbestos, urea-formaldehyde foam insulation, other chemicals, toxic wastes, or other potentially hazardous materials could, if present, adversely affect the value of the property. Unless otherwise stated in this report, the existence of hazardous substance, which may or may not be present on or in the property, was not considered by the appraiser in the development of the conclusion of value. The stated value estimate is predicated on the assumption that there is no material on or in the property that would cause such a loss in value. No responsibility is assumed for any such conditions, and the client has been advised that the appraiser is not qualified to detect such substances, quantify the impact on values, or develop the remedial cost. No environmental impact study has been ordered or made. Full compliance with applicable federal, state, and local environmental regulations and laws is assumed unless otherwise stated, defined, and considered in the report. It is also assumed that all required licenses, consents, or other legislative or administrative authority from any local, state, or national government or private entity organization either have been or can be obtained or renewed for any use which the report covers. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PROMONTORY POINTE, AUSTIN, TEXAS It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless a nonconformity has been stated, defined, and considered in the appraisal report. Further, it is assumed that the utilization of the land and improvements is within the boundaries of the property described and that no encroachment or trespass exists unless noted in the report. The Americans with Disabilities Act ("ADA") became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the act. If so, this fact could have a negative effect on the value of the property. Since we have no direct evidence relating to this issue, we did not consider the possible noncompliance with the requirements of ADA in estimating the value of the property. We have made a physical inspection of the property and noted visible physical defects, if any, in our report. This inspection was made by individuals generally familiar with real estate and building construction. However, these individuals are not architectural or structural engineers who would have detailed knowledge of building design and structural integrity. Accordingly, we do not opine on, nor are we responsible for, the structural integrity of the property including its conformity to specific governmental code requirements, such as fire, building and safety, earthquake, and occupancy, or any physical defects which were not readily apparent to the appraiser during the inspection. The value or values presented in this report are based upon the premises outlined herein and are valid only for the purpose or purposes stated. The date of value to which the conclusions and opinions expressed apply is set forth in this report. The value opinion herein rendered is based on the status of the national business economy and the purchasing power of the U.S. dollar as of that date. Testimony or attendance in court or at any other hearing is not required by reason of this appraisal unless arrangements are previously made within a reasonable time in advance for AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C PROMONTORY POINTE, AUSTIN, TEXAS such testimony, and then such testimony shall be at American Appraisal Associates, Inc.'s, prevailing per diem for the individuals involved. Possession of this report or any copy thereof does not carry with it the right of publication. No portion of this report (especially any conclusion to use, the identity of the appraiser or the firm with which the appraiser is connected, or any reference to the Appraisal Institute or the designations awarded by this organization) shall be disseminated to the public through prospectus, advertising, public relations, news, or any other means of communication without the written consent and approval of American Appraisal Associates, Inc. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D PROMONTORY POINTE, AUSTIN, TEXAS EXHIBIT D CERTIFICATE OF APPRAISER (1 PAGE) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D PROMONTORY POINTE, AUSTIN, TEXAS CERTIFICATE OF APPRAISER I certify that, to the best of my knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and represent the unbiased professional analyses, opinions, and conclusions of American Appraisal Associates, Inc. American Appraisal Associates, Inc. and I personally, have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. Compensation for American Appraisal Associates, Inc. is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. I personally did not inspect the subject property. Shayne Hatch provided significant real property appraisal assistance in the preparation of this report. I am currently in compliance with the Appraisal Institute's continuing education requirements. -s- Frank Fehribach ----------------------------------------- Frank Fehribach, MAI Managing Principal, Real Estate Group Texas State Certified General Real Estate Appraiser #TX-1323954-G AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PROMONTORY POINTE, AUSTIN, TEXAS EXHIBIT E QUALIFICATIONS OF APPRAISER (2 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PROMONTORY POINTE, AUSTIN, TEXAS FRANK A. FEHRIBACH, MAI MANAGING PRINCIPAL, REAL ESTATE GROUP POSITION Frank A. Fehribach is a Managing Principal for the Dallas Real Estate Group of American Appraisal Associates, Inc. ("AAA"). EXPERIENCE Valuation Mr. Fehribach has experience in valuations for resort hotels; Class A office buildings; Class A multifamily complexes; industrial buildings and distribution warehousing; multitract mixed-use vacant land; regional malls; residential subdivision development; and special-purpose properties such as athletic clubs, golf courses, manufacturing facilities, nursing homes, and medical buildings. Consulting assignments include development and feasibility studies, economic model creation and maintenance, and market studies. Mr. Fehribach also has been involved in overseeing appraisal and consulting assignments in Mexico and South America. Business Mr. Fehribach joined AAA as an engagement director in 1998. He was promoted to his current position in 1999. Prior to that, he was a manager at Arthur Andersen LLP. Mr. Fehribach has been in the business of real estate appraisal for over ten years. EDUCATION University of Texas - Arlington Master of Science - Real Estate University of Dallas Master of Business Administration - Industrial Management Bachelor of Arts - Economics STATE State of Arizona CERTIFICATIONS Certified General Real Estate Appraiser, #30828 State of Arkansas State Certified General Appraiser, #CG1387N State of Colorado Certified General Appraiser, #CG40000445 State of Georgia Certified General Real Property Appraiser, #218487 State of Michigan Certified General Appraiser, #1201008081 State of Texas Real Estate Salesman License, #407158 (Inactive) State of Texas State Certified General Real Estate Appraiser, #TX-1323954-G AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E PROMONTORY POINTE, AUSTIN, TEXAS PROFESSIONAL Appraisal Institute, MAI Designated Member AFFILIATIONS Candidate Member of the CCIM Institute pursuing Certified Commercial Investment Member (CCIM) designation PUBLICATIONS "An Analysis of the Determinants of Industrial Property Valuation," Co-authored with Dr. Ronald C. Rutherford and Dr. Mark Eakin, The Journal of Real Estate Research, Vol. 8, No. 3, Summer 1993, p. 365. AMERICAN APPRAISAL ASSOCIATES, INC. PROMONTORY POINTE, AUSTIN, TEXAS GENERAL SERVICE CONDITIONS AMERICAN APPRAISAL ASSOCIATES, INC. PROMONTORY POINTE, AUSTIN, TEXAS GENERAL SERVICE CONDITIONS The services(s) provided by AAA will be performed in accordance with professional appraisal standards. Our compensation is not contingent in any way upon our conclusions of value. We assume, without independent verification, the accuracy of all data provided to us. We will act as an independent contractor and reserve the right to use subcontractors. All files, workpapers or documents developed by us during the course of the engagement will be our property. We will retain this data for at least five years. Our report is to be used only for the specific purpose stated herein; and any other use is invalid. No reliance may be made by any third party without our prior written consent. You may show our report in its entirety to those third parties who need to review the information contained herein. No one should rely on our report as a substitute for their own due diligence. We understand that our reports will be described in public tender offer documents distributed to limited partners. We reserve the right to review the public tender offer documents prior to their issuance to confirm that disclosures of facts from the current appraisals are accurate. No reference to our name or our report, in whole or in part, in any other SEC filing or private placement memorandum you prepare and/or distribute to third parties may be made without our prior written consent. The Tender Offer Partnerships, as that term is defined in the Settlement Agreement, agree to indemnify and hold us harmless against and from any and all losses, claims, actions, damages, expenses or liabilities, including reasonable attorneys' fees, to which we may become subject in connection with this engagement except where such losses, claims, actions, damages, expenses or liabilities, including reasonable attorney's fees, arise or result from AAA's misconduct, bad faith or negligence. Co-Clients will not be liable for any of our acts or omissions. AAA is an equal opportunity employer.