EX-99.(C)(6) 8 d07277a2exv99wxcyx6y.txt APPRAISAL OF THE LEXINGTON THE LEXINGTON 3510 CHESHIRE SQUARE SARASOTA, FLORIDA MARKET VALUE - FEE SIMPLE ESTATE AS OF MAY 19,2003 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 7, 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: THE LEXINGTON 3510 CHESHIRE SQUARE SARASOTA, SARASOTA COUNTY, FLORIDA In accordance with your authorization, we have completed the appraisal of the above-referenced property. This complete appraisal is intended to report our analysis and conclusions in a summary format. The subject property consists of an apartment project having 267 units with a total of 277,239 square feet of rentable area. The improvements were built in 1974. The improvements are situated on 18.55 acres. Overall, the improvements are in average condition. As of the date of this appraisal, the subject property is 97% 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 THE LEXINGTON, SARASOTA, FLORIDA The opinions expressed in this appraisal cover letter can only be completely understood by reading the narrative report, addenda, and other data, which is attached. The appraisal is subject to the attached general assumptions and limiting conditions and general service conditions. As a result of our investigation, it is our opinion that the fee simple market value of the subject, effective May 19,2003 is: ($11,400,000) Respectfully submitted, AMERICAN APPRAISAL ASSOCIATES, INC. -s- Alice MacQueen July 7, 2003 Alice MacQueen #053272 Vice President, Real Estate Group Florida Certified General Real Estate Appraiser #RZ0002202 Report By: Alice MacQueen AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3 THE LEXINGTON, SARASOTA, FLORIDA TABLE OF CONTENTS Cover Letter of Transmittal Table of Contents APPRAISAL DATA Executive Summary ......................................................... 4 Introduction .............................................................. 9 Area Analysis ............................................................. 11 Market Analysis ........................................................... 14 Site Analysis ............................................................. 15 Improvement Analysis ...................................................... 15 Highest and Best Use ...................................................... 16 VALUATION Valuation Procedure ....................................................... 17 Sales Comparison Approach ................................................. 19 Income Capitalization Approach ............................................ 24 Reconciliation and Conclusion ............................................. 34
ADDENDA Exhibit A - Photographs of Subject Property Exhibit B - Summary of Rent Comparables and Photograph of Comparables Exhibit C - Assumptions and Limiting Conditions Exhibit D - Certificate of Appraiser Exhibit E - Qualifications General Service Conditions AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 4 THE LEXINGTON, SARASOTA, FLORIDA EXECUTIVE SUMMARY PART ONE - PROPERTY DESCRIPTION PROPERTY NAME: The Lexington LOCATION: 3510 Cheshire Square Sarasota, Florida INTENDED USE OF ASSIGNMENT: Court Settlement PURPOSE OF APPRAISAL: "As Is" Market Value of the Fee Simple Estate INTEREST APPRAISED: Fee simple estate DATE OF VALUE: May 19,2003 DATE OF REPORT: July 7, 2003 PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS: SITE: Size: 18.55 acres, or 808,038 square feet Assessor Parcel No.: 2202-09-0003 Floodplain: Community Panel No. 125150005B (September 29, 1996) Flood Zone C, an area outside the floodplain. Zoning: RMF-3 (Residential Multifamily) BUILDING: No. of Units: 267 Units Total NRA: 277,239 Square Feet Average Unit Size: 1,038 Square Feet Apartment Density: 14.4 units per acre Year Built: 1974 UNIT MIX AND MARKET RENT: GROSS RENTAL INCOME PROJECTION
Market Rent Square ----------------- Monthly Annual Unit Type Feet Per Unit Per SF Income Income --------- ------ -------- ------ -------- ---------- 1A10 733 $ 590 $ 0.80 $ 56,640 $ 679,680 2A20 1,114 $ 710 $ 0.64 $ 85,200 $1,022,400 3A20 1,353 $ 860 $ 0.64 $ 23,220 $ 278,640 3B20 1,500 $ 940 $ 0.63 $ 11,280 $ 135,360 4A20 1,555 $ 950 $ 0.61 $ 11,400 $ 136,800 ------------------------------ Total $187,740 $2,252,880 ==============================
OCCUPANCY: 97% ECONOMIC LIFE: 45 Years EFFECTIVE AGE: 25 Years AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5 THE LEXINGTON, SARASOTA, FLORIDA REMAINING ECONOMIC LIFE: 20 Years SUBJECT PHOTOGRAPHS AND LOCATION MAP: SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] AREA MAP [MAP] AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6 THE LEXINGTON, SARASOTA, FLORIDA NEIGHBORHOOD MAP [MAP] HIGHEST AND BEST USE: As Vacant: Hold for future multi-family development As Improved: Continuation as its current use METHOD OF VALUATION: In this instance, the Sales Comparison and Income Approaches to value were utilized. AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 7 THE LEXINGTON, SARASOTA, FLORIDA PART TWO - ECONOMIC INDICATORS INCOME CAPITALIZATION APPROACH
Amount $/Unit ------------------ --------------- DIRECT CAPITALIZATION Potential Rental Income $2,252,880 $8,438 Effective Gross Income $2,359,675 $8,838 Operating Expenses $1,232,709 $4,617 52.2% of EGI Net Operating Income: $1,060,216 $3,971 Capitalization Rate 9.50% DIRECT CAPITALIZATION VALUE $11,200,000 * $41,948 / UNIT DISCOUNTED CASH FLOW ANALYSIS: Holding Period 10 years 2002 Economic Vacancy 7% Stabilized Vacancy & Collection Loss: 8% Lease-up / Stabilization Period N/A Terminal Capitalization Rate 10.00% Discount Rate 12.00% Selling Costs 2.00% Growth Rates: Income 3.00% Expenses: 3.00% DISCOUNTED CASH FLOW VALUE $11,600,000 * $43,446 / UNIT RECONCILED INCOME CAPITALIZATION VALUE $11,400,000 $42,697 / UNIT
SALES COMPARISON APPROACH PRICE PER UNIT: Range of Sales $/Unit (Unadjusted) $34,137 to $48,539 Range of Sales $/Unit (Adjusted) $37,994 to $44,971 VALUE INDICATION - PRICE PER UNIT $10,700,000 * $40,075 / UNIT EGIM ANALYSIS Range of EGIMs from Improved Sales 0.00 to 0.00 Selected EGIM for Subject 0.00 Subject's Projected EGI $2,359,675 EGIM ANALYSIS CONCLUSION N/A * N/A / UNIT NOI PER UNIT ANALYSIS CONCLUSION N/A * N/A / UNIT RECONCILED SALES COMPARISON VALUE $10,700,000 $40,075 / UNIT
------------------------- * Value indications are after adjustments for concessions, deferred maintenance, excess land and lease-up costs, if any. AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 8 THE LEXINGTON, SARASOTA, FLORIDA PART THREE - SUMMARY OF VALUE CONCLUSIONS SALES COMPARISON APPROACH: Price Per Unit $10,700,000 NOI Per Unit N/A EGIM Multiplier N/A INDICATED VALUE BY SALES COMPARISON $10,700,000 $40,075 / UNIT INCOME APPROACH: Direct Capitalization Method: $11,200,000 Discounted Cash Flow Method: $11,600,000 INDICATED VALUE BY THE INCOME APPROACH $11,400,000 $42,697 / UNIT RECONCILED OVERALL VALUE CONCLUSION: $11,400,000 $42,697 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9 THE LEXINGTON, SARASOTA, FLORIDA INTRODUCTION IDENTIFICATION OF THE SUBJECT The subject property is located at 3510 Cheshire Square , Sarasota, Sarasota County, Florida. Sarasota identifies it as 2202-09-0003. SCOPE OF THE ASSIGNMENT The property, neighborhood, and comparables were inspected by Alice MacQueen on May 19,2003. Alice MacQueen performed the research, valuation analysis and wrote the report. Alice MacQueen has extensive experience in appraising similar properties and meets the USPAP competency provision. The scope of this investigation comprises the inspection of the property and the collection, verification, and analysis of general and specific data pertinent to the subject property. We have researched current improved sales and leases of similar properties, analyzing them as to their comparability, and adjusting them accordingly. We completed the Sales Comparison and Income Capitalization Approaches to value. From these approaches to value, a concluded overall value was made. DATE OF VALUE AND REPORT This appraisal was made to express the opinion of value as of May 19,2003. The date of the report is July 7, 2003. PURPOSE AND USE OF APPRAISAL The purpose of the appraisal is to estimate the market value of the fee simple interest in the subject property. It is understood that the appraisal is intended to assist the clients in litigation settlement proceedings. The appraisal was not based on a requested minimum valuation, a specific valuation, or the approval of a loan. PROPERTY RIGHTS APPRAISED We have appraised the Fee Simple Estate in the subject property (as applied in the Sales & Income Approaches), subject to the existing short-term leases. A Fee Simple Estate is defined in The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago: Appraisal Institute, 1993), as: AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10 THE LEXINGTON, SARASOTA, FLORIDA "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 SP V LP. 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 THE LEXINGTON, SARASOTA, FLORIDA AREA / NEIGHBORHOOD ANALYSIS NEIGHBORHOOD ANALYSIS A neighborhood is a group of complementary land uses. The function of the neighborhood analysis is to describe the immediate surrounding environs. The subject is located in the city of Sarasota, Florida. Overall, the neighborhood is characterized as a suburban setting with the predominant land use being residential. The subject's neighborhood is generally defined by the following boundaries. NEIGHBORHOOD BOUNDARIES East - Interstate 75 West - Washington Boulevard South - Clark Road North - University Parkway MAJOR EMPLOYERS As Florida's wealthiest market, Sarasota ranks 1st in effective buying income and 1st in retail sales. Housing is very affordable and household incomes are increasing. The cost of living is in retail sales. Employment throughout the area is very diverse. 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 THE LEXINGTON, SARASOTA, FLORIDA NEIGHBORHOOD DEMOGRAPHICS
AREA -------------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA --------------------------- ------------ ------------ ------------ ------------ POPULATION TRENDS Current Population 12,233 83,534 153,775 605,849 5-Year Population 12,538 86,640 161,812 652,633 % Change CY-5Y 2.5% 3.7% 5.2% 7.7% Annual Change CY-5Y 0.5% 0.7% 1.0% 1.5% HOUSEHOLDS Current Households 5,343 36,870 68,289 270,069 5-Year Projected Households 5,523 38,758 72,844 292,607 % Change CY-5Y 3.4% 5.1% 6.7% 8.3% Annual Change CY-5Y 0.7% 1.0% 1.3% 1.7% INCOME TRENDS Median Household Income $ 32,414 $ 35,231 $ 38,899 $ 38,205 Per Capita Income $ 18,606 $ 22,988 $ 25,820 $ 26,617 Average Household Income $ 41,709 $ 52,076 $ 58,012 $ 59,716
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 26.46% 27.03% 24.28% 18.60% 5-Year Projected % Renting 25.69% 26.72% 23.61% 18.04% % of Households Owning 60.51% 58.89% 62.94% 62.97% 5-Year Projected % Owning 61.46% 59.75% 64.28% 64.65%
Source: Demographics Now AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13 THE LEXINGTON, SARASOTA, FLORIDA SURROUNDING IMPROVEMENTS The following uses surround the subject property: North - Mini storage facility and multifamily community South - Multifamily community East - Single family West - Single family CONCLUSIONS The subject is well located within the city of Sarasota. The neighborhood is characterized as being mostly suburban in nature and is currently in the stable stage of development. The economic outlook for the neighborhood is judged to be favorable with a good economic base. AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 14 THE LEXINGTON, SARASOTA, FLORIDA MARKET ANALYSIS The subject property is located in the city of Sarasota in Sarasota County. The overall pace of development in the subject's market is more or less stable. There has been no new development in the subject's neighborhood in recent months and none known to be in a lease-up state. The following table illustrates historical vacancy rates for the subject's market. HISTORICAL VACANCY RATE
Period Region Submarket ------ ------------------ -------------------- 3Q02 5% to 6% estimated Subject Neighborhood
Occupancy trends in the subject's market are stable. Historically speaking, the subject's submarket has equated the overall market. No third party surveys were available. However, we did survey approximately 20 apartment communities throughout the Sarasota area in an effort to determine current market conditions. This survey indicates a very stable existing multifamily market with the vast majority of the communities surveyed indicating current occupancy rates ranging from about 93% to 98%. Rents are considered to be moderately increasing and no new units are known to be under construction or planned that would affect the existing supply/balance in the market. 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 Huntington Place 254 98% 1990 Adjacent R-2 Alahambra 129 95% 1972 A few blocks south R-3 The Colonnade 192 98% 1972 A few blocks south R-4 Coral Club 0 93% 1974 Same neighborhood Subject The Lexington 267 97% 1974
As previously stated, our investigation revealed no current market studies covering the multifamily housing market in Sarasota. However, based on our conversations with on site management and survey of numerous competitive properties, the existing conditions appear to be favorable. AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 15 THE LEXINGTON, SARASOTA, FLORIDA PROPERTY DESCRIPTION SITE ANALYSIS Site Area 18.55 acres, or 808,038 square feet Shape Irregular Topography Level Utilities All necessary utilities are available to the site. Soil Conditions Stable Easements Affecting Site None other than typical utility easements Overall Site Appeal Good Flood Zone: Community Panel 125150005B; , dated September 29, 1996 Flood Zone Zone C Zoning RMF-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 ------------- ---------- ---------- ----------- ----------- ---------- 2202-09-0003 $1,616,100 $8,469,500 $10,085,600 0.02572 $259,425
IMPROVEMENT ANALYSIS Year Built 1974 Number of Units 267 Net Rentable Area 277,239 Square Feet Construction: Foundation Reinforced concrete slab Frame Heavy or light wood Exterior Walls Wood or vinyl siding Roof Composition shingle over a wood truss structure Project Amenities Amenities at the subject include a swimming pool, sand volleyball, tennis court, gym room, playground, boat storage, car wash, laundry room, freshwater lake, and parking area. Unit Amenities Individual unit amenities include a balcony, cable TV connection, and washer dryer connection. Appliances available in each unit include a refrigerator stove, dishwasher, water heater, garbage disposal, and oven. AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16 THE LEXINGTON, SARASOTA, FLORIDA Unit Mix:
Unit Area Unit Type Number of Units (Sq. Ft.) --------- --------------- --------- 1A10 96 733 2A20 120 1,114 3A20 27 1,353 3B20 12 1,500 4A20 12 1,555
Overall Condition Average Effective Age 25 years Economic Life 45 years Remaining Economic Life 20 years Deferred Maintenance None HIGHEST AND BEST USE ANALYSIS In accordance with the definition of highest and best use, an analysis of the site relating to its legal uses, physical possibilities, and financial feasibility is appropriate. The highest and best use as vacant is to hold for future multi-family development. The subject improvements were constructed in 1974 and consist of a 267-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 THE LEXINGTON, SARASOTA, FLORIDA THE VALUATION PROCEDURE There are three traditional approaches, which can be employed in establishing the market value of the subject property. These approaches and their applicability to the valuation of the subject are summarized as follows: THE COST APPROACH The application of the Cost Approach is based on the principle of substitution. This principle may be stated as follows: no one is justified in paying more for a property than that amount by which he or she can obtain, by purchase of a site and construction of a building, without undue delay, a property of equal desirability and utility. In the case of a new building, no deficiencies in the building should exist. In the case of income-producing real estate, the cost of construction plays a minor and relatively insignificant role in determining market value. The Cost Approach is typically only a reliable indicator of value for: (a) new properties; (b) special use properties; and (c) where the cost of reproducing the improvements is easily and accurately quantified and there is no economic obsolescence. In all instances, the issue of an appropriate entrepreneurial profit - the reward for undertaking the risk of construction, remains a highly subjective factor especially in a market lacking significant speculative development. THE SALES COMPARISON APPROACH The Sales Comparison Approach is an estimate of value based upon a process of comparing recent sales of similar properties in the surrounding or competing areas to the subject property. Inherent in this approach is the principle of substitution. The application of this approach consists of comparing the subject property with similar properties of the same general type, which have been sold recently or currently are available for sale in competing areas. This comparative process involves judgment as to the similarity of the subject property and the comparable sale with respect to many value factors such as location, contract rent levels, quality of construction, reputation and prestige, age and condition, among others. The estimated value through this approach represents the probable price at which a willing seller would sell the subject property to a willing and knowledgeable buyer as of the date of value. AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 18 THE LEXINGTON, SARASOTA, FLORIDA THE INCOME CAPITALIZATION APPROACH The theory of the Income Capitalization Approach is based on the premise that present value is the value of the cash flow and reversionary value the property will produce over a reasonable holding (ownership) period. The Discounted Cash Flow Analysis will convert equity cash flows (including cash flows and equity reversion) into a present value utilizing an internal rate of return (or discount rate). The Internal Rate of Return (IRR) will be derived from a comparison of alternate investments, a comparative analysis of IRR's used by recent buyers of similar properties, and a review of published industry surveys. The Direct Capitalization Analysis converts one year of income into an overall value using overall capitalization rates from similar sales. The overall rates take into consideration buyers assumptions of the market over the long-term. The results of the Income Capitalization Analysis are usually the primary value indicator for income producing properties. Investors expect a reasonable rate of return on their equity investment based on the ownership risks involved; this approach closely parallels the investment decision process. RECONCILIATION In this instance, we have completed the Sales Comparison and Income Capitalization Approaches to value. As an income producing property, the income approach is a primary approach to value. The Sales Comparison Approach is also considered reliable as investors are buying similar buildings in the market. Our research indicates that market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, we have decided that the Cost Approach is not a reliable indicator of value for the subject, and this approach has not been utilized. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 19 THE LEXINGTON, SARASOTA, FLORIDA SALES COMPARISON APPROACH Use of market or comparable sales requires the collection and analysis of comparable sales data. Similar properties recently sold are compared to the subject and adjusted based on any perceived differences. This method is based on the premise that the costs of acquiring a substitute property would tend to establish a value for the subject property. The premise suggests that if a substitute is unavailable in the market, the reliability of the approach may be subordinate to the other approaches. The reliance on substitute properties produces shortcomings in the validity of this approach. Geographic and demographic characteristics from each submarket restrict which sales may be selected. Recent sales with a similar physical characteristics, income levels, and location are usually limited. The sales we have identified, however, do establish general valuation parameters as well as provide support to our conclusion derived through the income approach method. The standard unit of comparison among similar properties is the sales price per unit and price per square foot of net rentable area. To accurately adjust prices to satisfy the requirements of the sales comparison approach, numerous calculations and highly subjective judgments would be required including consideration of numerous income and expense details for which information may be unreliable or unknown. The sales price per unit and square foot are considered relevant to the investment decision, but primarily as a parameter against which value estimates derived through the income approach can be judged and compared. In examining the comparable sales, we have applied a subjective adjustment analysis, which includes specific adjustments derived from our experience and consulting with the market participants. SALES COMPARISON ANALYSIS Detailed on the following pages are sales transactions involving properties located in the subject's competitive investment market. Photographs of the sale transactions are located in the Addenda. Following the summary of sales is an adjustment grid that is used to arrive at a value. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 20 THE LEXINGTON, SARASOTA, FLORIDA SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 I - 3 ------------------------------------------------------------------------------------------------------------------------- Property Name The Lexington Coral Club Apartments Coconut Bay Capri Villas LOCATION: Address 3510 Cheshire Square 3441 Clark Road 2725 Coconut Bay Lane 1050 Capri City, State Sarasota, Florida Sarasota, FL Sarasota, FL Sarasota, FL County Sarasota Sarasota Sarasota Sarasota PHYSICAL CHARATERISTICS: Net Rentable Area (SF) 277,239 166,210 277,529 183,432 Year Built 1974 1974 1974 1983 Number of Units 267 154 249 180 Unit Mix: Type Total Type Total Type Total Type Total 1A10 96 1Br/1Ba 1Br/1Ba 1Br/1BA 2A20 120 2Br/2BA 2Br/2BA 2Br/2BA 3A20 27 3Br/2BA 3Br/2BA 3B20 12 3Br/2BA 4A20 12 Average Unit Size (SF) 1,038 1,079 1,115 1,019 Land Area (Acre) 18.5500 9.9255 10.0000 14.5400 Density (Units/Acre) 14.4 15.5 24.9 12.4 Parking Ratio (Spaces/Unit) 1.12 Adequate Adequate Adequate Parking Type (Gr., Cov., etc.) Garage, Open Covered Open Open Open CONDITION: Average Good Average Average APPEAL: Average Good Average Average AMENITIES: Pool/Spa Yes/No Yes/No Yes/No Yes/No Gym Room Yes Yes Yes Yes Laundry Room Yes Yes Yes Yes Secured Parking No No No No Sport Courts No No No No Washer/Dryer Connection Yes Yes No No Screened Patios/balconies Yes Yes Yes Yes OCCUPANCY: 97% 93% 90% 95% TRANSACTION DATA: Sale Date July, 2000 June, 2001 August, 2002 Sale Price ($) $7,475,000 $8,500,000 $7,729,800 Grantor Grantee Aspen Coral Club Club Mar Alliance BP, LP Associates, LTD Sale Documentation Public records Public records Public records Verification Public records Public records Public records Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $0 $0 $0.0 $0 $0 $0.0 $0 $0 $0.00 Vacancy/Credit Loss $0 $0 $0.0 $0 $0 $0.0 $0 $0 $0.00 Effective Gross Income $0 $0 $0.0 $0 $0 $0.0 $0 $0 $0.00 Operating Expenses $0 $0 $0.0 $0 $0 $0.0 $0 $0 $0.00 Net Operating Income $0 $0 $0.0 $0 $0 $0.0 $0 $0 $0.00 NOTES: Income information Income information Income information at at the time of sale at the time of sale the time of sale was not available was not available was not available PRICE PER UNIT $48,539 $34,137 $42,943 PRICE PER SQUARE FOOT $ 44.97 $ 30.63 $ 42.14 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?
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21 THE LEXINGTON, SARASOTA, FLORIDA IMPROVED SALES MAP [MAP] IMPROVED SALES ANALYSIS The improved sales indicate a sales price range from $34,137 to $48,539 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 $37,994 to $44,971 per unit with a mean or average adjusted price of $40,925 per unit. The median adjusted price is $39,808 per unit. Based on the following analysis, we have concluded to a value of $40,000 per unit, which results in an "as is" value of $10,700,000 (rounded after necessary adjustment, if any). AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22 THE LEXINGTON, SARASOTA, FLORIDA SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 I - 3 ---------------------------------------------------------------------------------------------------------------------------------- Property Name The Lexington Coral Club Apartments Coconut Bay Capri Villas Address 3510 Cheshire Square 3441 Clark Road 2725 Coconut Bay Lane 1050 Capri City Sarasota, Florida Sarasota, FL Sarasota, FL Sarasota, FL Sale Date July, 2000 June, 2001 August, 2002 Sale Price ($) $7,475,000 $8,500,000 $7,729,800 Net Rentable Area (SF) 277,239 166,210 277,529 183,432 Number of Units 267 154 249 180 Price Per Unit $48,539 $34,137 $42,943 Year Built 1974 1974 1974 1983 Land Area (Acre) 18.5500 9.9255 10.0000 14.5400 VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ. Property Rights Conveyed Fee Simple Estate Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple Estate 0% Financing Cash To Seller 0% Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Arm's Length 0% Date of Sale (Time) 07-2000 9% 06-2001 6% 08-2002 3% VALUE AFTER TRANS. ADJUST. ($/UNIT) $52,907 $36,185 $44,232 Location Superior -10% Comparable 0% Comparable 0% Number of Units 267 154 0% 249 0% 180 0% Quality / Appeal Good Comparable 0% Comparable 0% Comparable 0% Age / Condition 1974 1974 / Good -5% 1974 / Average 0% 1983 / Average -10% Occupancy at Sale 97% 93% 0% 90% 5% 95% 0% Amenities Good Comparable 0% Comparable 0% Comparable 0% Average Unit Size (SF) 1,038 1,079 0% 1,115 0% 1,019 0% PHYSICAL ADJUSTMENT -15% 5% -10% FINAL ADJUSTED VALUE ($/UNIT) $44,971 $37,994 $39,808
SUMMARY VALUE RANGE (PER UNIT) $37,994 TO $44,971 MEAN (PER UNIT) $40,925 MEDIAN (PER UNIT) $39,808 VALUE CONCLUSION (PER UNIT) $40,000
VALUE INDICATED BY SALES COMPARISON APPROACH $10,680,000 ROUNDED $10,700,000
NET OPERATING INCOME (NOI) ANALYSIS We did not conduct a net operating income (NOI) comparison analysis due to the lack of financial data. EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS We did not perform an effective gross income multiplier (EGIM) analysis due to the lack of financial data. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23 THE LEXINGTON, SARASOTA, FLORIDA 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 $10,700,000. Price Per Unit $10,700,000 NOI Per Unit N/A EGIM Analysis N/A Sales Comparison Conclusion $10,700,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 24 THE LEXINGTON, SARASOTA, FLORIDA INCOME CAPITALIZATION APPROACH The income capitalization approach is based on the premise that value is created by the expectation of future benefits. We estimated the present value of those benefits to derive an indication of the amount that a prudent, informed purchaser-investor would pay for the right to receive them as of the date of value. This approach requires an estimate of the NOI of a property. The estimated NOI is then converted to a value indication by use of either the direct capitalization or the discounted cash flow analysis (yield capitalization). Direct capitalization uses a single year's stabilized NOI as a basis for a value indication by dividing the income by a capitalization rate. The rate chosen accounts for a recapture of the investment by the investor and should reflect all factors that influence the value of the property, such as tenant quality, property condition, neighborhood change, market trends, interest rates, and inflation. The rate may be extracted from local market transactions or, when transaction evidence is lacking, obtained from trade sources. A discounted cash flow analysis focuses on the operating cash flows expected from the property and the proceeds of a hypothetical sale at the end of a holding period (the reversion). The cash flows and reversion are discounted to their present values using a market-derived discount rate and are added together to obtain a value indication. Because benefits to be received in the future are worth less than the same benefits received in the present, this method weights income in the early years more heavily than the income and the sale proceeds to be received later. The strength of the discounted cash flow method is its ability to recognize variations in projected net income, such as those caused by inflation, stepped leases, neighborhood change, or tenant turnover. Its weakness is that it requires many judgments regarding the actions of likely buyers and sellers of the property in the future. In some situations, both methods yield a similar result. The discounted cash flow method is typically more appropriate for the analysis of investment properties with multiple or long-term leases, particularly leases with cancellation clauses or renewal options. It is especially useful for multi-tenant properties in volatile markets. The direct capitalization AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 25 THE LEXINGTON, SARASOTA, FLORIDA method is normally more appropriate for properties with relatively stable operating histories and expectations. A pro forma analysis for the first year of the investment is made to estimate a reasonable potential net operating income for the Subject Property. Such an analysis entails an estimate of the gross income the property should command in the marketplace. From this total gross income must be deducted an allowance for vacancy/collection loss and operating expenses as dictated by general market conditions and the overall character of the subject's tenancy and leased income to arrive at a projected estimate of net operating income. Conversion of the net operating income to an indication of value is accomplished by the process of capitalization, as derived primarily from market data. MARKET RENT ANALYSIS In order to determine a market rental rate for the subject, a survey of competing apartment communities was performed. This survey was displayed previously in the market analysis section of the report. Detailed information pertaining to each of the comparable rental communities, along with photographs, is presented in the Addenda of this report. The following charts display the subject's current asking and actual rent rates as well as a comparison with the previous referenced comparable rental properties. SUMMARY OF ACTUAL AVERAGE RENTS
Average Unit Area ---------------- Unit Type (Sq. Ft.) Per Unit Per SF %Occupied ---------------------------------------------------------------------- 1A10 733 $589 $0.80 95.8% 2A20 1114 $708 $0.64 96.7% 3A20 1353 $859 $0.63 100.0% 3B20 1500 $939 $0.63 100.0% 4A20 1555 $943 $0.61 100.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26 THE LEXINGTON, SARASOTA, FLORIDA RENT ANALYSIS
COMPARABLE RENTS ---------------------------------------- R-1 R-2 R-3 R-4 ---------------------------------------- Huntington The Place Alahambra Colonnade Coral Club ----------------------------------------- COMPARISON TO SUBJECT SUBJECT SUBJECT ----------------------------------------- SUBJECT UNIT ACTUAL ASKING Slightly DESCRIPTION TYPE RENT RENT Superior Similar Similar Superior MIN MAX MEDIAN AVERAGE ------------------------------------------------------------------------------------------------------------------------------ Monthly Rent 1A10 $ 589 $ 623 $ 635 $ 630 $ 679 $ 585 $ 585 $ 679 $ 633 $ 632 Unit Area (SF) 733 733 684 900 680 555 555 900 682 705 Monthly Rent Per Sq. Ft. $ 0.80 $ 0.85 $0.93 $0.70 $ 1.00 $ 1.05 $ 0.70 $ 1.05 $ 0.96 $ 0.92 Monthly Rent 2A20 $ 708 $ 746 $ 745 $ 730 $ 785 $ 745 $ 730 $ 785 $ 745 $ 751 Unit Area (SF) 1,114 1,114 718 900 990 768 718 990 834 844 Monthly Rent Per Sq. Ft. $ 0.64 $ 0.67 $1.04 $0.81 $ 0.79 $ 0.97 $ 0.79 $ 1.04 $ 0.89 $ 0.90 Monthly Rent 3A20 $ 859 $ 878 $ 835 $ 915 $ 760 $ 760 $ 915 $ 835 $ 837 Unit Area (SF) 1,353 1,353 846 990 964 846 990 964 933 Monthly Rent Per Sq. Ft. $ 0.63 $ 0.65 $0.99 $ 0.92 $ 0.79 $ 0.79 $ 0.99 $ 0.92 $ 0.90 Monthly Rent 3B20 $ 939 $ 959 $ 835 $ 965 $ 875 $ 835 $ 965 $ 875 $ 892 Unit Area (SF) 1,500 1,500 846 1,063 1,020 846 1,063 1,020 976 Monthly Rent Per Sq. Ft. $ 0.63 $ 0.64 $0.99 $ 0.91 $ 0.86 $ 0.86 $ 0.99 $ 0.91 $ 0.92 Monthly Rent 4A20 $ 943 $ 979 $ 965 $ 875 $ 875 $ 965 $ 920 $ 920 Unit Area (SF) 1,555 1,555 1,063 1,020 1,020 1,063 1,042 1,042 Monthly Rent Per Sq. Ft. $ 0.61 $ 0.63 $ 0.91 $ 0.86 $ 0.86 $ 0.91 $ 0.88 $ 0.88
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 ------------------------------------------------------------------------------ 1A10 96 733 $590 $0.80 $ 56,640 $ 679,680 2A20 120 1,114 $710 $0.64 $ 85,200 $1,022,400 3A20 27 1,353 $860 $0.64 $ 23,220 $ 278,640 3B20 12 1,500 $940 $0.63 $ 11,280 $ 135,360 4A20 12 1,555 $950 $0.61 $ 11,400 $ 136,800 ---------------------------- Total $187,740 $2,252,880
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 27 THE LEXINGTON, SARASOTA, FLORIDA 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 $ 2,072,040 $ 7,760 $2,248,212 $8,420 $2,239,108 $8,386 Vacancy $ 60,620 $ 227 $ 86,350 $ 323 $ 88,419 $ 331 Credit Loss/Concessions $ 41,907 $ 157 $ 53,800 $ 201 $ 60,384 $ 226 ------------------------------------------------------------------------- Subtotal $ 102,527 $ 384 $ 140,150 $ 525 $ 148,803 $ 557 Laundry Income $ 12,565 $ 47 $ 17,019 $ 64 $ 17,759 $ 67 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 121,026 $ 453 $ 233,934 $ 876 $ 266,283 $ 997 ------------------------------------------------------------------------- Subtotal Other Income $ 133,591 $ 500 $ 250,953 $ 940 $ 284,042 $1,064 ------------------------------------------------------------------------- Effective Gross Income $ 2,103,104 $ 7,877 $2,359,015 $8,835 $2,374,347 $8,893 Operating Expenses Taxes $ 191,701 $ 718 $ 227,852 $ 853 $ 252,234 $ 945 Insurance $ 29,634 $ 111 $ 87,091 $ 326 $ 93,067 $ 349 Utilities $ 204,290 $ 765 $ 184,249 $ 690 $ 173,644 $ 650 Repair & Maintenance $ 84,953 $ 318 $ 65,562 $ 246 $ 45,650 $ 171 Cleaning $ 83,986 $ 315 $ 89,953 $ 337 $ 91,896 $ 344 Landscaping $ 136,785 $ 512 $ 109,080 $ 409 $ 136,917 $ 513 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 30,179 $ 113 $ 30,338 $ 114 $ 25,739 $ 96 General Administrative $ 237,755 $ 890 $ 268,798 $1,007 $ 213,591 $ 800 Management $ 111,194 $ 416 $ 123,602 $ 463 $ 118,898 $ 445 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------------- Total Operating Expenses $ 1,110,477 $ 4,159 $1,186,525 $4,444 $1,151,636 $4,313 Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------------- Net Income $ 992,627 $ 3,718 $1,172,490 $4,391 $1,222,711 $4,579 -------------------------------------------------------------------------------------------------------------------------- FISCAL YEAR 2003 ANNUALIZED 2003 --------------------------------------------- MANAGEMENT BUDGET PROJECTION AAA PROJECTION ------------------------------------------------------------------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT % -------------------------------------------------------------------------------------------------------------------------------- Revenues Rental Income $2,298,000 $8,607 $2,247,348 $8,417 $2,252,880 $8,438 100.0% Vacancy $ 74,775 $ 280 $ 144,840 $ 542 $ 135,173 $ 506 6.0% Credit Loss/Concessions $ 52,800 $ 198 $ 117,036 $ 438 $ 45,058 $ 169 2.0% ------------------------------------------------------------------------------ Subtotal $ 127,575 $ 478 $ 261,876 $ 981 $ 180,230 $ 675 8.0% Laundry Income $ 28,000 $ 105 $ 20,452 $ 77 $ 20,025 $ 75 0.9% Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% Other Misc. Revenue $ 254,400 $ 953 $ 270,068 $1,011 $ 267,000 $1,000 11.9% ------------------------------------------------------------------------------ Subtotal Other Income $ 282,400 $1,058 $ 290,520 $1,088 $ 287,025 $1,075 12.7% ------------------------------------------------------------------------------ Effective Gross Income $2,452,825 $9,187 $2,275,992 $8,524 $2,359,675 $8,838 100.0% Operating Expenses Taxes $ 277,285 $1,039 $ 273,904 $1,026 $ 267,000 $1,000 11.3% Insurance $ 87,895 $ 329 $ 86,160 $ 323 $ 93,450 $ 350 4.0% Utilities $ 182,400 $ 683 $ 275,884 $1,033 $ 193,575 $ 725 8.2% Repair & Maintenance $ 247,200 $ 926 $ 31,164 $ 117 $ 80,100 $ 300 3.4% Cleaning $ 0 $ 0 $ 78,840 $ 295 $ 93,450 $ 350 4.0% Landscaping $ 0 $ 0 $ 178,524 $ 669 $ 146,850 $ 550 6.2% Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% Marketing & Leasing $ 30,000 $ 112 $ 20,488 $ 77 $ 26,700 $ 100 1.1% General Administrative $ 220,464 $ 826 $ 213,632 $ 800 $ 213,600 $ 800 9.1% Management $ 123,661 $ 463 $ 114,244 $ 428 $ 117,984 $ 442 5.0% Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% ------------------------------------------------------------------------------ Total Operating Expenses $1,168,905 $4,378 $1,272,840 $4,767 $1,232,709 $4,617 52.2% Reserves $ 0 $ 0 $ 0 $ 0 $ 66,750 $ 250 5.4% ------------------------------------------------------------------------------ Net Income $1,283,920 $4,809 $1,003,152 $3,757 $1,060,216 $3,971 44.9% -------------------------------------------------------------------------------------------------------------------------------
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 8% based on the subject's historical performance, as well as the anticipated future market conditions. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28 THE LEXINGTON, SARASOTA, FLORIDA RESERVES FOR REPLACEMENT "Reserves for replacements" is a contingency account allocated to the expenses of the property to provide for replacement of short-lived items and for unforeseen necessary capital expenditures. We have utilized the Korpacz Real Estate Investor Survey of the national apartment market, which reports a range of replacement reserves between $150 and $400 per unit. For purposes of this analysis, we have included an allowance of $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 29 THE LEXINGTON, SARASOTA, FLORIDA Based on this information and our perception of the market, we have concluded the subject's overall capitalization rate should be 9.50%. The terminal capitalization rate is applied to the net operating income estimated for the year following the end of the holding period. Based on the concluded overall capitalization rate, the age of the property and the surveyed information, we have concluded the subject's terminal capitalization rate to be 10.00%. Finally, the subject's discount rate or yield rate is estimated based on the previous investor survey and an examination of returns available on alternative investments in the market. Based on this analysis, the subject's discount rate is estimated to be 12.00%. HOLDING PERIOD The survey of investors indicates that most investors are completing either 10-year cash flows or extending the analysis to the end of the lease if it is more than 10-years. A 10-year period has been used in the analysis of the subject with the eleventh year stabilized NOI used to determine the reversion. SELLING COSTS Sales of similar size properties are typically accomplished with the aid of a broker and will also incur legal and other transaction related cost. Based on our survey of brokers and a review of institutional investor projections, an allowance of 2.00% of the sale amount is applied. DISCOUNTED CASH FLOW CONCLUSION Discounting the annual cash flows and the equity reversion at the selected rate of 12.00% indicates a value of $11,600,000. In this instance, the reversion figure contributes approximately 39% 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 30 THE LEXINGTON, SARASOTA, FLORIDA DISCOUNTED CASH FLOW ANALYSIS THE LEXINGTON
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009 APR-2010 FISCAL YEAR 1 2 3 4 5 6 7 ----------------------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- REVENUE Base Rent $ 2,252,880 $ 2,320,466 $ 2,390,080 $ 2,461,783 $ 2,535,636 $ 2,611,705 $ 2,690,57 Vacancy $ 135,173 $ 139,228 $ 143,405 $ 147,707 $ 152,138 $ 156,702 $ 161,403 Credit Loss $ 45,058 $ 46,409 $ 47,802 $ 49,236 $ 50,713 $ 52,234 $ 53,801 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------- Subtotal $ 180,230 $ 185,637 $ 191,206 $ 196,943 $ 202,851 $ 208,936 $ 215,205 Laundry Income $ 20,025 $ 20,626 $ 21,245 $ 21,882 $ 22,538 $ 23,214 $ 23,911 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 267,000 $ 275,010 $ 283,260 $ 291,758 $ 300,511 $ 309,526 $ 318,812 ----------------------------------------------------------------------------------------------- Subtotal Other Income $ 287,025 $ 295,636 $ 304,505 $ 313,640 $ 323,049 $ 332,741 $ 342,723 ----------------------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME $ 2,359,675 $ 2,430,465 $ 2,503,379 $ 2,578,480 $ 2,655,835 $ 2,735,510 $ 2,817,575 OPERATING EXPENSES: Taxes $ 267,000 $ 275,010 $ 283,260 $ 291,758 $ 300,511 $ 309,526 $ 318,812 Insurance $ 93,450 $ 96,254 $ 99,141 $ 102,115 $ 105,179 $ 108,334 $ 111,584 Utilities $ 193,575 $ 199,382 $ 205,364 $ 211,525 $ 217,870 $ 224,406 $ 231,139 Repair & Maintenance $ 80,100 $ 82,503 $ 84,978 $ 87,527 $ 90,153 $ 92,858 $ 95,644 Cleaning $ 93,450 $ 96,254 $ 99,141 $ 102,115 $ 105,179 $ 108,334 $ 111,584 Landscaping $ 146,850 $ 151,256 $ 155,793 $ 160,467 $ 165,281 $ 170,239 $ 175,347 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 26,700 $ 27,501 $ 28,326 $ 29,176 $ 30,051 $ 30,953 $ 31,881 General Administrative $ 213,600 $ 220,008 $ 226,608 $ 233,406 $ 240,409 $ 247,621 $ 255,050 Management $ 117,984 $ 121,523 $ 125,169 $ 128,924 $ 132,792 $ 136,775 $ 140,879 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES $ 1,232,709 $ 1,269,690 $ 1,307,781 $ 1,347,014 $ 1,387,425 $ 1,429,047 $ 1,471,919 Reserves $ 66,750 $ 68,753 $ 70,815 $ 72,940 $ 75,128 $ 77,382 $ 79,703 NET OPERATING INCOME $ 1,060,216 $ 1,092,022 $ 1,124,783 $ 1,158,527 $ 1,193,282 $ 1,229,081 $ 1,265,953 ============================================================================================================================== Operating Expense Ratio (% of EGI) 52.2% 52.2% 52.2% 52.2% 52.2% 52.2% 52.2% Operating Expense Per Unit $ 4,617 $ 4,755 $ 4,898 $ 5,045 $ 5,196 $ 5,352 $ 5,513 ============================================================================================================================== YEAR APR-2011 APR-2012 APR-2013 APR-2014 FISCAL YEAR 8 9 10 11 ----------------------------- ----------- ----------- ----------- ----------- REVENUE Base Rent $ 2,770,58 $ 2,853,881 $ 2,939,497 $ 3,027,682 Vacancy $ 166,745 $ 171,233 $ 176,370 $ 181,661 Credit Loss $ 55,415 $ 57,078 $ 58,790 $ 60,554 Concessions $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------- Subtotal $ 221,661 $ 228,310 $ 235,160 $ 242,215 Laundry Income $ 24,628 $ 25,367 $ 26,128 $ 26,912 Garage Revenue $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 328,376 $ 338,228 $ 348,374 $ 358,826 ----------------------------------------------------- Subtotal Other Income $ 353,005 $ 363,595 $ 374,503 $ 385,738 EFFECTIVE GROSS INCOME $ 2,902,102 $ 2,989,165 $ 3,078,840 $ 3,171,205 ----------------------------------------------------- OPERATING EXPENSES: Taxes $ 328,376 $ 338,228 $ 348,374 $ 358,826 Insurance $ 114,932 $ 118,380 $ 121,931 $ 125,589 Utilities $ 238,073 $ 245,215 $ 252,571 $ 260,149 Repair & Maintenance $ 98,513 $ 101,468 $ 104,512 $ 107,648 Cleaning $ 114,932 $ 118,380 $ 121,931 $ 125,589 Landscaping $ 180,607 $ 186,025 $ 191,606 $ 197,354 Security $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 32,838 $ 33,823 $ 34,837 $ 35,883 General Administrative $ 262,701 $ 270,582 $ 278,700 $ 287,061 Management $ 145,105 $ 149,458 $ 153,942 $ 158,560 Miscellaneous $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------- TOTAL OPERATING EXPENSES $ 1,516,076 $ 1,561,559 $ 1,608,405 $ 1,656,657 Reserves $ 82,094 $ 84,557 $ 87,094 $ 89,706 NET OPERATING INCOME $ 1,303,932 $ 1,343,050 $ 1,383,341 $ 1,424,841 ===================================================================================== Operating Expense Ratio (% of EGI) 52.2% 52.2% 52.2% 52.2% Operating Expense Per Unit $ 5,678 $ 5,849 $ 6,024 $ 6,205 =====================================================================================
Estimated Stabilized NOI $ 1,060,216 Sales Expense Rate 2.00% Months to Stabilized 1% Discount Rate 12.00% Stabilized Occupancy 94.0 Terminal Cap Rate 10.00%
Gross Residual Sale Price $ 14,248,415 Deferred Maintenance $ 0 Less: Sales Expense $ 284,968 Add: Excess Land $ 0 ------------- Net Residual Sale Price $ 13,963,446 Other Adjustments $ 0 ------------- PV of Reversion $ 4,495,856 Value Indicated By "DCF" $ 11,588,298 Add: NPV of NOI $ 7,092,442 Rounded $ 11,600,000 ============= PV Total $ 11,588,298
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE TOTAL VALUE 11.50% 11.75% 12.00% 12.25% 12.50% --------------------------- ------------- ------------- ------------- ------------- ------------- TERMINAL CAP RATE 9.50% $ 12,208,278 $ 12,014,517 $ 11,824,922 $ 11,639,388 $ 11,457,815 9.75% $ 12,081,379 $ 11,890,429 $ 11,703,576 $ 11,520,718 $ 11,341,756 10.00% $ 11,960,826 $ 11,772,546 $ 11,588,298 $ 11,407,982 $ 11,231,500 10.25% $ 11,846,153 $ 11,660,413 $ 11,478,643 $ 11,300,745 $ 11,126,622 10.50% $ 11,736,941 $ 11,553,619 $ 11,374,209 $ 11,198,614 $ 11,026,739
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31 THE LEXINGTON, SARASOTA, FLORIDA INCOME LOSS DURING LEASE-UP The subject is currently near or at a stabilized condition. Therefore, there is no income loss during lease-up at the subject property. CONCESSIONS Concessions have historically not been utilized at the subject property or in the subject's market. Therefore, no adjustment was included for concessions. DIRECT CAPITALIZATION METHOD After having projected the income and expenses for the property, the next step in the valuation process is to capitalize the net income into an estimate of value. The selected overall capitalization rate ("OAR") covers both return on and return of capital. It is the overall rate of return an investor expects. After considering the market transactions and the investor surveys, we previously conclude that an overall rate of 9.50% percent is applicable to the subject. The results of our direct capitalization analysis are as follows: AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 32 THE LEXINGTON, SARASOTA, FLORIDA THE LEXINGTON
TOTAL PER SQ. FT. PER UNIT %OF EGI ---------------------------------- ----- ----------- ----------- ----------- ------------ REVENUE Base Rent $ 2,252,880 $ 8.13 $ 8,438 Less: Vacancy & Collection Loss 8.00% $ 180,230 $ 0.65 $ 675 Plus: Other Income Laundry Income $ 20,025 $ 0.07 $ 75 0.85% Garage Revenue $ 0 $ 0.00 $ 0 0.00% Other Misc. Revenue $ 267,000 $ 0.96 $ 1,000 11.32% -------------------------------------------------------- Subtotal Other Income $ 287,025 $ 1.04 $ 1,075 12.16% EFFECTIVE GROSS INCOME $ 2,359,675 $ 8.51 $ 8,838 OPERATING EXPENSES: Taxes $ 267,000 $ 0.96 $ 1,000 11.32% Insurance $ 93,450 $ 0.34 $ 350 3.96% Utilities $ 193,575 $ 0.70 $ 725 8.20% Repair & Maintenance $ 80,100 $ 0.29 $ 300 3.39% Cleaning $ 93,450 $ 0.34 $ 350 3.96% Landscaping $ 146,850 $ 0.53 $ 550 6.22% Security $ 0 $ 0.00 $ 0 0.00% Marketing & Leasing $ 26,700 $ 0.10 $ 100 1.13% General Administrative $ 213,600 $ 0.77 $ 800 9.05% Management 5.00% $ 117,984 $ 0.43 $ 442 5.00% Miscellaneous $ 0 $ 0.00 $ 0 0.00% TOTAL OPERATING EXPENSES $ 1,232,709 $ 4.45 $ 4,617 52.24% Reserves $ 66,750 $ 0.24 $ 250 2.83% -------------------------------------------------------- NET OPERATING INCOME $ 1,060,216 $ 3.82 $ 3,971 44.93% ======================================================================================================== "GOING IN" CAPITALIZATION RATE 9.50% VALUE INDICATION $11,160,167 $ 40.25 $ 41,798 "AS IS" VALUE INDICATION (DIRECT CAPITALIZATION APPROACH) $11,160,167 ROUNDED $11,200,000 $ 40.40 $ 41,948 ========================================================================================================
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33 THE LEXINGTON, SARASOTA, FLORIDA DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF -------- ------------ ------------ -------- ------- 8.75% $ 12,116,753 $ 12,100,000 $ 45,318 $ 43.64 9.00% $ 11,780,176 $ 11,800,000 $ 44,195 $ 42.56 9.25% $ 11,461,793 $ 11,500,000 $ 43,071 $ 41.48 9.50% $ 11,160,167 $ 11,200,000 $ 41,948 $ 40.40 9.75% $ 10,874,009 $ 10,900,000 $ 40,824 $ 39.32 10.00% $ 10,602,159 $ 10,600,000 $ 39,700 $ 38.23 10.25% $ 10,343,569 $ 10,300,000 $ 38,577 $ 37.15
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD Applying the capitalization rate to our estimated NOI results in an estimated value of $11,200,000. 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 $11,600,000 Direct Capitalization Method $11,200,000
Giving consideration to the indicated values provided by both techniques, we have concluded the estimated value by the income capitalization approach to be $11,400,000. AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 34 THE LEXINGTON, SARASOTA, FLORIDA RECONCILIATION AND CONCLUSION This appraisal was made to express an opinion as of the Market Value of the fee simple estate in the property. AS IS MARKET VALUE OF THE FEE SIMPLE ESTATE Cost Approach Not Utilized Sales Comparison Approach $10,700,000 Income Approach $11,400,000 Reconciled Value $11,400,000
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 19,2003 the market value of the fee simple estate in the property is: $11,400,000 AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA THE LEXINGTON, SARASOTA, FLORIDA ADDENDA AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A THE LEXINGTON, SARASOTA, FLORIDA EXHIBIT A SUBJECT PHOTOGRAPHS AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A THE LEXINGTON, SARASOTA, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] [PICTURE] [PICTURE] [PICTURE] [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A THE LEXINGTON, SARASOTA, FLORIDA SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] [PICTURE] [PICTURE] [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B THE LEXINGTON, SARASOTA, FLORIDA EXHIBIT B SUMMARY OF RENT COMPARABLES AND PHOTOGRAPH OF COMPARABLES AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B THE LEXINGTON, SARASOTA, FLORIDA PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES COMPARABLE I-1 COMPARABLE I-2 COMPARABLE I-3 CORAL CLUB APARTMENTS COCONUT BAY CAPRI VILLAS 3441 Clark Road 2725 Coconut Bay Lane 1050 Capri Sarasota, FL Sarasota, FL Sarasota, FL [PICTURE] [PICTURE] N/A N/A N/A AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B THE LEXINGTON, SARASOTA, FLORIDA SUMMARY OF COMPARABLE RENTAL PROPERTIES
DESCRIPTION SUBJECT -------------------------------- --------------------------------------------------- Property Name The Lexington Management Company Aimco LOCATION: Address 3510 Cheshire Square City, State Sarasota, Florida County Sarasota Proximity to Subject PHYSICAL CHARATERISTICS: Net Rentable Area (SF) 277,239 Year Built 1974 Effective Age 25 Building Structure Type Wood/Stucco Parking Type (Gr., Cov., etc.) Open Number of Units 267 Unit Mix: Type Unit Qty. Mo.Rent 1 1A10 733 96 $589 2 2A20 1,114 120 $708 3 3A20 1,353 27 $859 4 3B20 1,500 12 $939 5 4A20 1,555 12 $943 Average Unit Size (SF) 1,038 Unit Breakdown: Efficiency 2-Bedroom 1-Bedroom 3-Bedroom CONDITION: Average APPEAL: Average AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. Fireplace Other X Cable TV Ready Project Amenities X Swimming Pool X Boat Storage Spa/Jacuzzi X Car Wash Basketball Court BBQ Equipment Volleyball Court Theater Room X Sand Volley Ball Meeting Hall X Tennis Court Secured Parking Racquet Ball X Laundry Room Jogging Track Business Office X Gym Room X Freshwater Lake X Playground OCCUPANCY: 97% LEASING DATA: Available Leasing Terms 6 to 12 months Concessions Pet Deposit Utilities Paid by Tenant: X Electric X Natural Gas Water Trash Confirmation Manager Telephone Number 813-933-2449 NOTES: COMPARISON TO SUBJECT: COMPARABLE DESCRIPTION R - 1 -------------------------------- --------------------------------------------------- Property Name Huntington Place Management Company JMG Realty LOCATION: Address 3201 Huntington Place Drive City, State Sarasota, FL County Sarasota Proximity to Subject Adjacent PHYSICAL CHARATERISTICS: Net Rentable Area (SF) Unknown Year Built 1990 Effective Age 13 Building Structure Type Wood/stucco Parking Type (Gr., Cov., etc.) Open, controlled access Number of Units 254 Unit Mix: Type Unit Qty. Mo. 1 1Br/1Ba 684 $635 2 2Br/2Ba 718 $745 3 3Br/2Ba 846 $835 4 3Br/2Ba 846 $835 Average Unit Size (SF) Unit Breakdown: Efficiency 2-Bedroom X 1-Bedroom X 3-Bedroom X CONDITION: Good APPEAL: Good AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. X Fireplace Other X Cable TV Ready Project Amenities X Swimming Pool Boat Storage Spa/Jacuzzi X Car Wash Basketball Court BBQ Equipment Volleyball Court Theater Room X Sand Volley Ball Meeting Hall X Tennis Court X Secured Parking Racquet Ball X Laundry Room Jogging Track Business Office X Gym Room X Freshwater Lake X Playground OCCUPANCY: 98% LEASING DATA: Available Leasing Terms 6 to 12 months Concessions None Pet Deposit Yes Utilities Paid by Tenant: X Electric X Natural Gas Water Trash Confirmation Leasing agent Telephone Number 941-951-1033 NOTES: Gated community located adjacent to the subject. Superior in terms of overall curb appeal and age/condition. COMPARISON TO SUBJECT: Superior COMPARABLE DESCRIPTION R - 2 -------------------------------- --------------------------------------------------- Property Name Alahambra Management Company Lee Management LOCATION: Address 1651 Beneva Road City, State Sarasota, FL County Sarasota Proximity to Subject A few blocks south PHYSICAL CHARATERISTICS: Net Rentable Area (SF) Unknown Year Built 1972 Effective Age 31 Building Structure Type Wood/stucco Parking Type (Gr., Cov., etc.) Open Number of Units 129 Unit Mix: Type Unit Qty. Mo. 1 1Br/1Ba 900 $630 2 2Br/2Ba 900 $730 Average Unit Size (SF) Unit Breakdown: Efficiency 2-Bedroom X 1-Bedroom X 3-Bedroom CONDITION: Average APPEAL: Average AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. Fireplace Other X Cable TV Ready Project Amenities X Swimming Pool Boat Storage X Spa/Jacuzzi Car Wash Basketball Court BBQ Equipment Volleyball Court Theater Room Sand Volley Ball Meeting Hall Tennis Court Secured Parking X Racquet Ball X Laundry Room Jogging Track Business Office X Gym Room Freshwater Lake Playground OCCUPANCY: 95% LEASING DATA: Available Leasing Terms 6 to 13 months Concessions 1/2 off 1st and last months rent Pet Deposit Yes Utilities Paid by Tenant: X Electric X Natural Gas Water Trash Confirmation Leasing Agent Telephone Number 941-922-7405 NOTES: Good location along Beneva Road, south of Fruitville Road. Property has good curb appeal and appears to be in average condition. COMPARISON TO SUBJECT: Similar COMPARABLE DESCRIPTION R - 3 -------------------------------- --------------------------------------------------- Property Name The Colonnade Management Company Owners Management LOCATION: Address 3516 Coronado Drive City, State Sarasota, FL County Sarasota Proximity to Subject A few blocks south PHYSICAL CHARATERISTICS: Net Rentable Area (SF) Unknown Year Built 1972 Effective Age 31 Building Structure Type Stucco Parking Type (Gr., Cov., etc.) Open Number of Units 192 Unit Mix: Type Unit Qty. Mo. 1 1Br/1Ba 680 $679 2 2Br/2Ba 990 $785 3 3Br/2Ba 990 $915 4 3Br/2Ba 1,063 $965 5 3Br/2Ba 1,063 $965 Average Unit Size (SF) Unit Breakdown: Efficiency 2-Bedroom X 1-Bedroom X 3-Bedroom X CONDITION: Average APPEAL: Average AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. Fireplace Other Cable TV Ready Screened Patios Project Amenities X Swimming Poo l X Boat Storage Spa/Jacuzzi X Car Wash Basketball Court BBQ Equipment X Volleyball Court Theater Room X Sand Volley Ball Meeting Hall X Tennis Court Secured Parking Racquet Ball X Laundry Room Jogging Track Business Office X Gym Room X Freshwater Lake Playground OCCUPANCY: 98% LEASING DATA: Available Leasing Terms 6 to 12 months Concessions None Pet Deposit Yes Utilities Paid by Tenant: X Electric X Natural Gas Water Trash Confirmation Leasing agent Telephone Number 941-921-4656 NOTES: Good location along Beneva Road, south of Fruitville Road. Property has good curb appeal and appears to be in average condition. Overall, very similar to the subject property. COMPARISON TO SUBJECT: Similar
COMPARABLE DESCRIPTION R - 4 -------------------------------- -------------------------------------------------- Property Name Coral Club Management Company PCMG LOCATION: Address 3441 Clark Road City, State Sarasota, FL County Sarasota Proximity to Subject Same neighborhood PHYSICAL CHARATERISTICS: Net Rentable Area (SF) 166,210 Year Built 1974 Effective Age 29 Building Structure Type Parking Type (Gr., Cov., etc.) Number of Units Unit Mix: Type Unit Qty. Mo. 1 1Br/1Ba 555 $585 2 2Br/2Ba 768 $745 3 3Br/2Ba 964 $760 4 3Br/2Ba 1,020 $875 5 3Br/2Ba 1,020 $875 Average Unit Size (SF) Unit Breakdown: Efficiency 2-Bedroom X 1-Bedroom X 3-Bedroom X CONDITION: Average APPEAL: Average AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling X Balcony X W/D Connect. Fireplace Other Cable TV Ready Project Amenities X Swimming Pool Boat Storage 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 Business Office X Gym Room X Freshwater Lake Playground OCCUPANCY: 93% LEASING DATA: Available Leasing Terms 6 to 12 months Concessions $99 move-in special Pet Deposit Yes Utilities Paid by Tenant: X Electric X Natural Gas Water Trash Confirmation Leasing agent Telephone Number 941-924-3602 NOTES: Located in more upscale area of south Sarasota, nearer to the beaches. COMPARISON TO SUBJECT: Slightly Superior
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B THE LEXINGTON, SARASOTA, FLORIDA PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES COMPARABLE R-1 COMPARABLE R-2 COMPARABLE R-3 HUNTINGTON PLACE ALAHAMBRA THE COLONNADE 3201 Huntington Place Drive 1651 Beneva Road 3516 Coronado Drive Sarasota, FL Sarasota, FL Sarasota, FL [PICTURE] [PICTURE] [PICTURE] COMPARABLE R-4 CORAL CLUB N/A 3441 Clark Road Sarasota, FL [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C THE LEXINGTON, SARASOTA, FLORIDA EXHIBIT C ASSUMPTIONS AND LIMITING CONDITIONS (3 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C THE LEXINGTON, SARASOTA, FLORIDA No responsibility is assumed for matters legal in nature. No investigation has been made of the title to or any liabilities against the property appraised. In this appraisal, it is presumed that, unless otherwise noted, the owner's claim is valid, the property rights are good and marketable, and there are no encumbrances which cannot be cleared through normal processes. To the best of our knowledge, all data set forth in this report are true and accurate. Although gathered from reliable sources, no guarantee is made nor liability assumed for the accuracy of any data, opinions, or estimates identified as being furnished by others which have been used in formulating this analysis. Land areas and descriptions used in this appraisal were obtained from public records and have not been verified by legal counsel or a licensed surveyor. No soil analysis or geological studies were ordered or made in conjunction with this report, nor were any water, oil, gas, or other subsurface mineral and use rights or conditions investigated. Substances such as asbestos, urea-formaldehyde foam insulation, other chemicals, toxic wastes, or other potentially hazardous materials could, if present, adversely affect the value of the property. Unless otherwise stated in this report, the existence of hazardous substance, which may or may not be present on or in the property, was not considered by the appraiser in the development of the conclusion of value. The stated value estimate is predicated on the assumption that there is no material on or in the property that would cause such a loss in value. No responsibility is assumed for any such conditions, and the client has been advised that the appraiser is not qualified to detect such substances, quantify the impact on values, or develop the remedial cost. No environmental impact study has been ordered or made. Full compliance with applicable federal, state, and local environmental regulations and laws is assumed unless otherwise stated, defined, and considered in the report. It is also assumed that all required licenses, consents, or other legislative or administrative authority from any local, state, or national government or private entity organization either have been or can be obtained or renewed for any use which the report covers. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C THE LEXINGTON, SARASOTA, FLORIDA It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless a nonconformity has been stated, defined, and considered in the appraisal report. Further, it is assumed that the utilization of the land and improvements is within the boundaries of the property described and that no encroachment or trespass exists unless noted in the report. The Americans with Disabilities Act ("ADA") became effective January 26, 1992. We have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property together with a detailed analysis of the requirements of the ADA could reveal that the property is not in compliance with one or more of the requirements of the act. If so, this fact could have a negative effect on the value of the property. Since we have no direct evidence relating to this issue, we did not consider the possible noncompliance with the requirements of ADA in estimating the value of the property. We have made a physical inspection of the property and noted visible physical defects, if any, in our report. This inspection was made by individuals generally familiar with real estate and building construction. However, these individuals are not architectural or structural engineers who would have detailed knowledge of building design and structural integrity. Accordingly, we do not opine on, nor are we responsible for, the structural integrity of the property including its conformity to specific governmental code requirements, such as fire, building and safety, earthquake, and occupancy, or any physical defects which were not readily apparent to the appraiser during the inspection. The value or values presented in this report are based upon the premises outlined herein and are valid only for the purpose or purposes stated. The date of value to which the conclusions and opinions expressed apply is set forth in this report. The value opinion herein rendered is based on the status of the national business economy and the purchasing power of the U.S. dollar as of that date. Testimony or attendance in court or at any other hearing is not required by reason of this appraisal unless arrangements are previously made within a reasonable time in advance for AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C THE LEXINGTON, SARASOTA, FLORIDA such testimony, and then such testimony shall be at American Appraisal Associates, Inc.'s, prevailing per diem for the individuals involved. Possession of this report or any copy thereof does not carry with it the right of publication. No portion of this report (especially any conclusion to use, the identity of the appraiser or the firm with which the appraiser is connected, or any reference to the American Society of Appraisers 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 THE LEXINGTON, SARASOTA, FLORIDA EXHIBIT D CERTIFICATE OF APPRAISER (1 PAGE) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D CERTIFICATE OF APPRAISER I certify that, to the best of my knowledge and belief The statements of fact contained in this report are true and correct. The report analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and represent the impartial and 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 or bias with respect to the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. The engagement of American Appraisal Associates, Inc., and myself personally in this assignment and compensation for American Appraisal Associates, Inc., are not contingent on the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal. The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice and the Principles of Appraisal Practice and Code of Ethics of the American Society of Appraisers. I personally inspected the property that is the subject of this report. No one provided me with significant real property appraisal. -s- ALICE MAcQUEEN ----------------------------------------------- Alice MacQueen Vice President, Real Estate Group Florida Certified General Real Estate Appraiser #RZ0002202 AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E THE LEXINGTON, SARASOTA, FLORIDA EXHIBIT E QUALIFICATIONS OF APPRAISER (2 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E THE LEXINGTON, SARASOTA, FLORIDA ALICE MAcQUEEN VICE PRESIDENT AND PRINCIPAL, REAL ESTATE GROUP POSITION Alice MacQueen serves as a Vice President and Principal for the Dallas Real Estate Group of American Appraisal Associates, Inc. ("AAA"). EXPERIENCE Valuation Ms. MacQueen specializes in the appraisal of investment real estate and is annually involved in the valuation of several billion dollars of real property. The purposes of these valuations include allocation of purchase price, charitable donation, financing, purchase, sale, and syndication. She has also been involved in land planning analyses for major mixed-use developments. She has appraised various types of real estate including congregate care facilities, industrial properties, manufacturing facilities, office buildings, recreational subdivisions and planned unit developments, single- and multifamily residential properties, and shopping centers. Special-purpose properties she has appraised include campgrounds, churches, country clubs, golf courses, historic landmarks, proprietary cemeteries, and schools. In addition to market value opinions, Ms. MacQueen has provided feasibility and highest and best use studies. She has also been involved in several research projects, providing background studies involving major property tax appeal cases. These studies included the impact of inflation, rate of return considerations, sales-assessment ratio analyses, and the applicability of income capitalization to commercial and industrial properties. AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E THE LEXINGTON, SARASOTA, FLORIDA Ms. MacQueen has appraised real estate in 46 U.S. states, Mexico, and Puerto Rico. Business Ms. MacQueen joined AAA in 1983. She served as Regional Real Estate Director for the southeastern United States from 1987 to 1992 and as National Director of the Real Estate Valuation Group from 1992 through 1995, when she assumed her current position. Before joining the firm, she was involved in property management for five years and spent an additional five years as an appraiser, consultant, and research analyst. EDUCATION Realtors Institute of Virginia Greenbrier College for Women - Liberal Arts STATE CERTIFICATIONS State of Arizona, Certified General Real Estate Appraiser, #30987 State of Florida, Certified General Appraiser, #RZ0002202 State of Georgia, Certified General Real Property Appraiser, #239776 State of Minnesota, Certified General Real Property Appraiser, #AP-20144872 State of New Mexico, General Certified Appraiser, #001626-G State of Utah, State Certified General Appraiser, #CG00057001 PROFESSIONAL American Society of Appraisers, Candidate AFFILIATIONS AMERICAN APPRAISAL ASSOCIATES, INC. THE LEXINGTON, SARASOTA, FLORIDA GENERAL SERVICE CONDITIONS AMERICAN APPRAISAL ASSOCIATES, INC. THE LEXINGTON, SARASOTA, FLORIDA GENERAL SERVICE CONDITIONS The services(s) provided by AAA will be performed in accordance with professional appraisal standards. Our compensation is not contingent in any way upon our conclusions of value. We assume, without independent verification, the accuracy of all data provided to us. We will act as an independent contractor and reserve the right to use subcontractors. All files, workpapers or documents developed by us during the course of the engagement will be our property. We will retain this data for at least five years. Our report is to be used only for the specific purpose stated herein; and any other use is invalid. No reliance may be made by any third party without our prior written consent. You may show our report in its entirety to those third parties who need to review the information contained herein. No one should rely on our report as a substitute for their own due diligence. We understand that our reports will be described in public tender offer documents distributed to limited partners. We reserve the right to review the public tender offer documents prior to their issuance to confirm that disclosures of facts from the current appraisals are accurate. No reference to our name or our report, in whole or in part, in any other SEC filing or private placement memorandum you prepare and/or distribute to third parties may be made without our prior written consent. The Tender Offer Partnerships, as that term is defined in the Settlement Agreement, agree to indemnify and hold us harmless against and from any and all losses, claims, actions, damages, expenses or liabilities, including reasonable attorneys' fees, to which we may become subject in connection with this engagement except where such losses, claims, actions, damages, expenses or liabilities, including reasonable attorney's fees, arise or result from AAA's misconduct, bad faith or negligence. Co-Clients will not be liable for any of our acts or omissions. AAA is an equal opportunity employer.