EX-99.(C)(7) 9 d07277a2exv99wxcyx7y.txt APPRAISAL OF WOODLAND VILLAGE WOODLAND VILLAGE APARTMENTS 2221 BUSH RIVER ROAD COLUMBIA, SOUTH CAROLINA MARKET VALUE - FEE SIMPLE ESTATE AS OF MAY 27, 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 3, 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: WOODLAND VILLAGE APARTMENTS 2221 BUSH RIVER ROAD COLUMBIA, LEXINGTON COUNTY, SOUTH CAROLINA 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 308 units with a total of 383,904 square feet of rentable area. The improvements were built in 1972. The improvements are situated on 24.993 acres. Overall, the improvements are in average condition. As of the date of this appraisal, the subject property is 94% 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 27, 2003 is: ($15,900,000) Respectfully submitted, AMERICAN APPRAISAL ASSOCIATES, INC. -s- Frank Fehribach July 3, 2003 Frank Fehribach, MAI #053272 Managing Principal, Real Estate Group South Carolina Temporary Practice Permit #095-03 Report By: Jimmy Pat James, MAI South Carolina Temporary Practice Permit #103-03 Assisted By: David Johnsen, MAI AMERICAN APPRAISAL ASSOCIATES, INC. TABLE OF CONTENTS PAGE 3 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA TABLE OF CONTENTS Cover Letter of Transmittal Table of Contents APPRAISAL DATA Executive Summary................................................... 4 Introduction........................................................ 9 Area Analysis....................................................... 11 Market Analysis..................................................... 14 Site Analysis....................................................... 16 Improvement Analysis ............................................... 16 Highest and Best Use ............................................... 17 VALUATION Valuation Procedure................................................. 18 Sales Comparison Approach........................................... 20 Income Capitalization Approach ..................................... 26 Reconciliation and Conclusion ...................................... 38
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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA EXECUTIVE SUMMARY PART ONE - PROPERTY DESCRIPTION PROPERTY NAME: Woodland Village Apartments LOCATION: 2221 Bush River Road Columbia, South Carolina 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 27, 2003 DATE OF REPORT: July 3, 2003 PHYSICAL DESCRIPTION - SITE & IMPROVEMENTS: SITE: Size: 24.993 acres, or 1,088,695 square feet Assessor Parcel No.: 3697-02-070 Floodplain: Community Panel No. 45063C0161 G (February 9, 2000) Flood Zone X, an area outside the floodplain. Zoning: R3 (High Density Residential) BUILDING: No. of Units: 308 Units Total NRA: 383,904 Square Feet Average Unit Size: 1,246 Square Feet Apartment Density: 12.3 units per acre Year Built: 1972 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 - 1A10 (Pine) 960 $ 610 $ 0.64 $ 43,920 $ 527,040 1Br/1Ba - 1B10 (Birch) 985 $ 620 $ 0.63 $ 4,960 $ 59,520 2Br/2Ba - 2A20 (Maple) 1,200 $ 690 $ 0.58 $ 33,120 $ 397,440 2Br/2Ba - 2B20 (Oak) 1,295 $ 720 $ 0.56 $ 11,520 $ 138,240 2Br/1.5Ba - 2A15 1,370 $ 720 $ 0.53 $ 25,920 $ 311,040 2Br/1.5Ba - 2B15 1,394 $ 700 $ 0.50 $ 39,200 $ 470,400 3Br/2Ba - 3A20 1,260 $ 790 $ 0.63 $ 31,600 $ 379,200 3Br/2Ba - 3B20 (Elm) 1,583 $ 900 $ 0.57 $ 18,000 $ 216,000 3Br/2.5Ba - 3A25 1,595 $ 920 $ 0.58 $ 11,040 $ 132,480 --------- ----------- Total $ 219,280 $ 2,631,360 ========= ===========
AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 5 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA OCCUPANCY: 94% ECONOMIC LIFE: 45 Years EFFECTIVE AGE: 20 Years REMAINING ECONOMIC LIFE: 25 Years SUBJECT PHOTOGRAPHS AND LOCATION MAP: SUBJECT PHOTOGRAPHS [PICTURE] [PICTURE] ENTRANCE FROM BUSH RIVER ROAD STREET SCENE - SUBJECT IS TO THE LEFT AREA MAP [MAP] AMERICAN APPRAISAL ASSOCIATES, INC. EXECUTIVE SUMMARY PAGE 6 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA PART TWO - ECONOMIC INDICATORS INCOME CAPITALIZATION APPROACH
DIRECT CAPITALIZATION Amount $/Unit ----------------------- ---------- ------- Potential Rental Income $ 2,631,360 $ 8,543 Effective Gross Income $ 2,522,224 $ 8,189 Operating Expenses $ 1,091,691 $ 3,544 43.3% of EGI Net Operating Income: $ 1,353,533 $ 4,395 Capitalization Rate 8.50% DIRECT CAPITALIZATION VALUE $15,900,000 * $ 51,623 / UNIT DISCOUNTED CASH FLOW ANALYSIS: Holding Period 10 years 2002 Economic Vacancy 17% Stabilized Vacancy & Collection Loss: 10% Lease-up / Stabilization Period N/A Terminal Capitalization Rate 10.00% Discount Rate 11.00% Selling Costs 2.00% Growth Rates: Income 3.00% Expenses: 3.00% DISCOUNTED CASH FLOW VALUE $ 15,800,000 * $ 51,299 / UNIT RECONCILED INCOME CAPITALIZATION VALUE $ 15,900,000 $ 51,623 / UNIT
SALES COMPARISON APPROACH PRICE PER UNIT: Range of Sales $/Unit (Unadjusted) $ 32,862 to $56,667 Range of Sales $/Unit (Adjusted) $ 45,000 to $54,545 VALUE INDICATION - PRICE PER UNIT $ 15,400,000 * $ 50,000 / UNIT EGIM ANALYSIS Range of EGIMs from Improved Sales 4.91 to 6.68 Selected EGIM for Subject 6.00 Subject's Projected EGI $ 2,522,224 EGIM ANALYSIS CONCLUSION $ 15,100,000 * $ 49,026 / UNIT NOI PER UNIT ANALYSIS CONCLUSION $ 16,000,000 * $ 51,948 / UNIT RECONCILED SALES COMPARISON VALUE $ 15,500,000 $ 50,325 / 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA PART THREE - SUMMARY OF VALUE CONCLUSIONS SALES COMPARISON APPROACH: Price Per Unit $ 15,400,000 NOI Per Unit $ 16,000,000 EGIM Multiplier $ 15,100,000 INDICATED VALUE BY SALES COMPARISON $ 15,500,000 $ 50,325 / UNIT INCOME APPROACH: Direct Capitalization Method: $ 15,900,000 Discounted Cash Flow Method: $ 15,800,000 INDICATED VALUE BY THE INCOME APPROACH $ 15,900,000 $ 51,623 / UNIT RECONCILED OVERALL VALUE CONCLUSION: $ 15,900,000 $ 51,623 / UNIT
AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 9 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA INTRODUCTION IDENTIFICATION OF THE SUBJECT The subject property is located at 2221 Bush River Road, Columbia, Lexington County, South Carolina. Columbia identifies it as 3697-02-070. SCOPE OF THE ASSIGNMENT The property, neighborhood, and comparables were inspected by David Johnsen, MAI on May 27, 2003. Jimmy Pat James, MAI and Frank Fehribach, MAI have not made a personal inspection of the subject property. David Johnsen, MAI assisted Jimmy Pat James, MAI with the research, valuation analysis and writing the report. Frank Fehribach, MAI reviewed the report and concurs with the value. Frank Fehribach, MAI, Jimmy Pat James, MAI, and David Johnsen, MAI 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 27, 2003. The date of the report is July 3, 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 & AMERICAN APPRAISAL ASSOCIATES, INC. INTRODUCTION PAGE 10 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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: "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 Shelter Properties V Limited Partnership. 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 Columbia, South Carolina. 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 - I-26 West - Saluda River South - I-20 North - St. Andrews Road MAJOR EMPLOYERS Major employers in the subject's area include the Colombiana Mall and the Lexington Medical Center. Downtown Columbia is a ten minute drive from the subject property. 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA NEIGHBORHOOD DEMOGRAPHICS
AREA ---------------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA ------------------------- ------------ ------------ ------------ -------- POPULATION TRENDS Current Population 4,061 45,930 111,016 551,370 5-Year Population 3,935 46,402 113,554 589,900 % Change CY-5Y -3.1% 1.0% 2.3% 7.0% Annual Change CY-5Y -0.6% 0.2% 0.5% 1.4% HOUSEHOLDS Current Households 1,844 21,027 46,578 211,176 5-Year Projected Households 1,855 21,790 48,958 232,278 % Change CY - 5Y 0.6% 3.6% 5.1% 10.0% Annual Change CY-5Y 0.1% 0.7% 1.0% 2.0% INCOME TRENDS Median Household Income $ 47,073 $ 36,396 $ 36,559 $ 40,596 Per Capita Income $ 24,866 $ 21,795 $ 20,287 $ 21,559 Average Household Income $ 54,682 $ 47,361 $ 48,321 $ 56,291
Source: Demographics Now The subject neighborhood's population is expected to show increases below that of the region. The immediate market offers superior income levels as compared to the broader market. The following table illustrates the housing statistics in the subject's immediate area, as well as the MSA region. HOUSING TRENDS
AREA ---------------------------------------------- CATEGORY 1-MI. RADIUS 3-MI. RADIUS 5-MI. RADIUS MSA ------------------------- ------------ ------------ ------------ -------- HOUSING TRENDS % of Households Renting 43.71% 47.30% 41.86% 29.64% 5-Year Projected % Renting 44.72% 47.32% 42.22% 29.06% % of Households Owning 48.56% 44.04% 50.05% 63.62% 5-Year Projected % Owning 47.68% 44.17% 49.98% 64.71%
Source: Demographics Now AMERICAN APPRAISAL ASSOCIATES, INC. AREA ANALYSIS PAGE 13 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA SURROUNDING IMPROVEMENTS The following uses surround the subject property: North - Single-family South - Commercial/retail East - I-20 West - Multi-family CONCLUSIONS The subject is well located within the city of Columbia. 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA MARKET ANALYSIS The subject property is located in the city of Columbia in Lexington County. The overall pace of development in the subject's market is more or less stable. There are no new apartment projects located within the immediate subject area. The newest project (YOC 2003) within the subject submarket (Northwest/St. Andrews) is Crestmont, located near the Columbiana Mall. The following table illustrates historical vacancy rates for the subject's market. HISTORICAL VACANCY RATE
Period Region Submarket -------- ------ --------- Oct. '00 8.4% 7.5% April '01 8.4% 8.6% Oct. '01 9.2% 9.1% April '02 8.7% 9.8% Oct. '02 8.0% 8.7%
Source: Carolina's Real Data Occupancy trends in the subject's market are stable. Historically speaking, the subject's submarket has equated the overall market. This market has been exhibiting an increase in the overall vacancy rate. The Northwest/St. Andrews submarket is the largest apartment market in Columbia, containing approximately 42.1% of the total market. Market rents in the subject's market have been following an increasing trend. The following table illustrates historical rental rates for the subject's market. HISTORICAL AVERAGE RENT
Period Region % Change Submarket % Change --------- ------ -------- --------- -------- Oct. '00 $ 595 - $ 580 - April '01 $ 601 1.0% $ 585 0.9% Oct. '01 $ 613 2.0% $ 598 2.2% April '02 $ 619 1.0% $ 598 0.0% Oct. '02 $ 624 0.8% $ 603 0.8%
Source: Carolina's Real Data The following table illustrates a summary of the subject's competitive set. AMERICAN APPRAISAL ASSOCIATES, INC. MARKET ANALYSIS PAGE 15 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA COMPETITIVE PROPERTIES
No. Property Name Units Ocpy. Year Built Proximity to subject --- -------------------------- ----- ----- ---------- ------------------------------- R-1 Ashland Commons 112 90% 1972 1/2 mile west of the subject R-2 Churchill at St. Andrews 132 89% 1972 1 mile west of the subject R-3 Landmark 336 82% 1972 1/2 mile north of the subject R-4 Stoneycreek 196 90% 1969 1 mile northeast of the subject R-5 St. Andrews Commons 336 90% 1987 1 mile north of the subject Subject Woodland Village Apartments 308 94% 1972
Overall, this market commands slightly lower rates than the overall Columbia market. AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 16 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA PROPERTY DESCRIPTION SITE ANALYSIS Site Area 24.993 acres, or 1,088,695 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 Good Flood Zone: Community Panel 45063C0161 G, dated February 9, 2000 Flood Zone Zone X Zoning R3, 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 ------------- ----------- ----------- ------------ ---------- --------- 3697-02-070 $ 1,661,012 $ 8,960,238 $ 10,621,250 0.02068 $ 219,699
IMPROVEMENT ANALYSIS Year Built 1972 Number of Units 308 Net Rentable Area 383,904 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, tennis court, laundry room, business office, and parking area. Unit Amenities Individual unit amenities include a balcony, fireplace, cable TV connection, and washer dryer connection. Appliances available in each unit include a refrigerator, stove, dishwasher, water heater, garbage disposal, and oven. AMERICAN APPRAISAL ASSOCIATES, INC. PROPERTY DESCRIPTION PAGE 17 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA Unit Mix:
Unit Area Unit Type Number of Units (Sq. Ft.) ----------------------- --------------- --------- 1Br/1Ba - 1A10 (Pine) 72 960 1Br/1Ba - 1B10 (Birch) 8 985 2Br/2Ba - 2A20 (Maple) 48 1,200 2Br/2Ba - 2B20 (Oak) 16 1,295 2Br/1.5Ba - 2A15 (Aspen) 36 1,370 2Br/1.5Ba - 2B15 (Bradford) 56 1,394 3Br/2Ba - 3A20 (Palmetto) 40 1,260 3Br/2Ba - 3B20 (Elm) 20 1,583 3Br/2.5Ba - 3A25 (Mulberry) 12 1,595
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 1972 and consist of a 308-unit multifamily project. The highest and best use as improved is for a continued multifamily use. Overall, the highest and best use of the subject property is the continued use of the existing apartment project. AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 18 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA THE VALUATION PROCEDURE There are three traditional approaches, which can be employed in establishing the market value of the subject property. These approaches and their applicability to the valuation of the subject are summarized as follows: THE COST APPROACH The application of the Cost Approach is based on the principle of substitution. This principle may be stated as follows: no one is justified in paying more for a property than that amount by which he or she can obtain, by purchase of a site and construction of a building, without undue delay, a property of equal desirability and utility. In the case of a new building, no deficiencies in the building should exist. In the case of income-producing real estate, the cost of construction plays a minor and relatively insignificant role in determining market value. The Cost Approach is typically only a reliable indicator of value for: (a) new properties; (b) special use properties; and (c) where the cost of reproducing the improvements is easily and accurately quantified and there is no economic obsolescence. In all instances, the issue of an appropriate entrepreneurial profit - the reward for undertaking the risk of construction, remains a highly subjective factor especially in a market lacking significant speculative development. THE SALES COMPARISON APPROACH The Sales Comparison Approach is an estimate of value based upon a process of comparing recent sales of similar properties in the surrounding or competing areas to the subject property. Inherent in this approach is the principle of substitution. The application of this approach consists of comparing the subject property with similar properties of the same general type, which have been sold recently or currently are available for sale in competing areas. This comparative process involves judgment as to the similarity of the subject property and the comparable sale with respect to many value factors such as location, contract rent levels, quality of construction, reputation and prestige, age and condition, among others. The estimated value through this approach represents the probable price at which a willing seller would sell the subject property to a willing and knowledgeable buyer as of the date of value. AMERICAN APPRAISAL ASSOCIATES, INC. VALUATION PROCEDURE PAGE 19 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA THE INCOME CAPITALIZATION APPROACH The theory of the Income Capitalization Approach is based on the premise that present value is the value of the cash flow and reversionary value the property will produce over a reasonable holding (ownership) period. The Discounted Cash Flow Analysis will convert equity cash flows (including cash flows and equity reversion) into a present value utilizing an internal rate of return (or discount rate). The Internal Rate of Return (IRR) will be derived from a comparison of alternate investments, a comparative analysis of IRR's used by recent buyers of similar properties, and a review of published industry surveys. The Direct Capitalization Analysis converts one year of income into an overall value using overall capitalization rates from similar sales. The overall rates take into consideration buyers assumptions of the market over the long-term. The results of the Income Capitalization Analysis are usually the primary value indicator for income producing properties. Investors expect a reasonable rate of return on their equity investment based on the ownership risks involved; this approach closely parallels the investment decision process. RECONCILIATION In this instance, we have completed the Sales Comparison and Income Capitalization Approaches to value. As an income producing property, the income approach is a primary approach to value. The Sales Comparison Approach is also considered reliable as investors are buying similar buildings in the market. Our research indicates that market participants are generally not buying, selling, investing, or lending with reliance placed on the methodology of the Cost Approach to establish the value. Therefore, we have decided that the Cost Approach is not a reliable indicator of value for the subject, and this approach has not been utilized. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 20 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA SALES COMPARISON APPROACH Use of market or comparable sales requires the collection and analysis of comparable sales data. Similar properties recently sold are compared to the subject and adjusted based on any perceived differences. This method is based on the premise that the costs of acquiring a substitute property would tend to establish a value for the subject property. The premise suggests that if a substitute is unavailable in the market, the reliability of the approach may be subordinate to the other approaches. The reliance on substitute properties produces shortcomings in the validity of this approach. Geographic and demographic characteristics from each submarket restrict which sales may be selected. Recent sales with a similar physical characteristics, income levels, and location are usually limited. The sales we have identified, however, do establish general valuation parameters as well as provide support to our conclusion derived through the income approach method. The standard unit of comparison among similar properties is the sales price per unit and price per square foot of net rentable area. To accurately adjust prices to satisfy the requirements of the sales comparison approach, numerous calculations and highly subjective judgments would be required including consideration of numerous income and expense details for which information may be unreliable or unknown. The sales price per unit and square foot are considered relevant to the investment decision, but primarily as a parameter against which value estimates derived through the income approach can be judged and compared. In examining the comparable sales, we have applied a subjective adjustment analysis, which includes specific adjustments derived from our experience and consulting with the market participants. SALES COMPARISON ANALYSIS Detailed on the following pages are sales transactions involving properties located in the subject's competitive investment market. Photographs of the sale transactions are located in the Addenda. Following the summary of sales is an adjustment grid that is used to arrive at a value. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 21 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA SUMMARY OF COMPARABLE SALES -IMPROVED
COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 ------------------------------ --------------------------- ------------------------ ------------------------ Property Name Woodland Village Apartments Raintree Ashton at Longcreek LOCATION: Address 2221 Bush River Road 3500 Fernandina Road 1401 Longcreek Drive City, State Columbia, South Carolina Columbia, SC Columbia, SC County Lexington Lexington Richland PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 383,904 148,380 220,100 Year Built 1972 1972 1974 Number of Units 308 138 220 Unit Mix: Type Total Type Total Type Total 1Br/1Ba - 1A10 72 1Br/1Ba 20 1Br/1Ba 64 (Pine) 1Br/1Ba - 1B10 8 1Br/1.5Ba 12 2Br/2Ba 140 (Birch) 2Br/2Ba - 2A20 48 2Br/1.5Ba 100 3Br/2Ba 16 (Maple) 2Br/2Ba - 2B20 (Oak) 16 3Br/2.5Ba 6 2Br/1.5Ba - 2A15 36 (Aspen) 2Br/1.5Ba - 2B15 56 (Bradford) 3Br/2Ba - 3A20 40 (Palmetto) 3Br/2Ba - 3B20 (Elm) 20 3Br/2.5Ba - 3A25 12 (Mulberry) Average Unit Size (SF) 1,246 1,075 1,000 Land Area (Acre) 24.9930 7.7700 13.0200 Density (Units/Acre) 12.3 17.8 16.9 Parking Ratio (Spaces/Unit) 0.00 N/A N/A Parking Type (Gr., Cov., etc.) Open Open Open CONDITION: Good Good Good APPEAL: Good Good Good AMENITIES: Pool/Spa Yes/Yes Yes/No Yes/No Gym Room No No No Laundry Room Yes Yes Yes Secured Parking No No No Sport Courts No No No Washer/Dryer Connection Yes Yes Yes OCCUPANCY: 94% 91% 93% TRANSACTION DATA: Sale Date January, 2002 February, 2001 Sale Price ($) $4,535,000 $9,600,000 Grantor Raintree Garden Intermark Associates Associates, II Grantee Fernandina AHF-Ahston and Properties Stoneycreek LLC Sale Documentation Book 6944, Book R0483, Page 80 Page 2162 Verification Lexington County Richland County Records Records Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $1,015,373 $7,358 $6.84 $1,544,592 $7,021 $7.02 Vacancy/Credit Loss $ 91,384 $ 662 $0.62 $ 108,121 $ 491 $0.49 Effective Gross Income $ 923,989 $6,696 $6.23 $1,436,471 $6,529 $6.53 Operating Expenses $ 483,000 $3,500 $3.26 $ 660,800 $3,004 $3.00 Net Operating Income $ 440,989 $3,196 $2.97 $ 775,671 $3,526 $3.52 NOTES: None None PRICE PER UNIT $32,862 $43,636 PRICE PER SQUARE FOOT $ 30.56 $ 43.62 EXPENSE RATIO 52.3% 46.0% EGIM 4.91 6.68 OVERALL CAP RATE 9.72% 8.08% Cap Rate based on Pro Forma or Actual Income? PRO FORMA PRO FORMA COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 ------------------------------ ------------------------ ----------------------- ---------------------- Property Name Stoneycreek St. Andrews Broad River Trace LOCATION: Address 18 Berry Hill Road 601 St. Andrews Road 551 River Hill Circle City, State Columbia, SC Columbia, SC Columbia, SC County Lexington Lexington Richland PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 183,724 255,650 257,340 Year Built 1969 1973 1998 Number of Units 196 224 240 Unit Mix: Type Total Type Total Type Total 1Br/1Ba 88 1Br/1Ba 40 1Br/1Ba 84 2Br/1.5Ba 8 2Br/1.5Ba 64 2Br/2Ba 120 2Br/2Ba 100 2Br/2Ba 88 3Br/2Ba 36 3Br/2Ba 32 Average Unit Size (SF) 937 1,141 1,072 Land Area (Acre) 10.5700 16.8600 38.7400 Density (Units/Acre) 18.5 13.3 6.2 Parking Ratio (Spaces/Unit) N/A N/A N/A Parking Type (Gr., Cov., etc.) Open Open Garage, Open CONDITION: Good Good Excellent APPEAL: Good Good Excellent AMENITIES: Pool/Spa Yes/No Yes/No Yes/Yes Gym Room No No Yes Laundry Room Yes Yes Yes Secured Parking No No Yes Sport Courts No Yes Yes Washer/Dryer Connection Yes Yes Yes OCCUPANCY: 96% 90% 97% TRANSACTION DATA: Sale Date February, 2001 September, 2000 April, 2000 Sale Price ($) $7,249,000 $8,000,000 $13,600,000 Grantor Intermark Alliance GT4 LP Broad River Associates Trace, LLC Grantee AHF-Ashton and UDR South Carolina SG Broad River Trace- Stoneycreek LLC Trust Cola LLC Sale Documentation Book 6191, Book 6014, Book R0403, Page 182 Page 2 Page 1489 Verification Lexington County Lexington County Richland County Records Records Records Telephone Number ESTIMATED PRO-FORMA: Total $ $/Unit $/SF Total $ $/Unit $/SF Total $ $/Unit $/SF Potential Gross Income $1,318,608 $6,728 $7.18 $1,745,280 $7,791 $6.83 $2,163,600 $9,015 $8.41 Vacancy/Credit Loss $ 65,930 $ 336 $0.36 $ 174,528 $ 779 $0.68 $ 108,130 $ 451 $0.42 Effective Gross Income $1,252,678 $6,391 $6.82 $1,570,752 $7,012 $6.14 $2,055,470 $8,564 $7.99 Operating Expenses $ 632,932 $3,229 $3.45 $ 785,376 $3,506 $3.07 $ 839,477 $3,498 $3.26 Net Operating Income $ 619,746 $3,162 $3.37 $ 785,376 $3,506 $3.07 $1,215,993 $5,067 $4.73 NOTES: None None None PRICE PER UNIT $36,985 $35,714 $56,667 PRICE PER SQUARE FOOT $ 39.46 $ 31.29 $ 52.85 EXPENSE RATIO 50.5% 50.0% 40.8% EGIM 5.79 5.09 6.62 OVERALL CAP RATE 8.55% 9.82% 8.94% Cap Rate based on Pro Forma or Actual Income? PRO FORMA PRO FORMA PRO FORMA
AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 22 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA IMPROVED SALES MAP [MAP] IMPROVED SALES ANALYSIS The improved sales indicate a sales price range from $32,862 to $56,667 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 $45,000 to $54,545 per unit with a mean or average adjusted price of $50,567 per unit. The median adjusted price is $50,937 per unit. Based on the following analysis, we have concluded to a value of $50,000 per unit, which results in an "as is" value of $15,400,000 (rounded after necessary adjustment, if any). AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 23 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA SALES ADJUSTMENT GRID
COMPARABLE COMPARABLE DESCRIPTION SUBJECT I - 1 I - 2 ------------------------------------------------------------------------------------------------ Property Name Woodland Village Raintree Ashton at Longcreek Apartments Address 2221 Bush River Road 3500 Fernandina 1401 Longcreek Road Drive City Columbia, South Columbia, SC Columbia, SC Carolina Sale Date January, 2002 February, 2001 Sale Price ($) $4,535,000 $9,600,000 Net Rentable Area (SF) 383,904 148,380 220,100 Number of Units 308 138 220 Price Per Unit $32,862 $43,636 Year Built 1972 1972 1974 Land Area (Acre) 24.9930 7.7700 13.0200 VALUE ADJUSTMENTS DESCRIPTION DESCRIPTION ADJ. DESCRIPTION ADJ. ------------------------------------------------------------------------------------------------ Property Rights Conveyed Fee Simple Estate Fee Simple 0% Fee Simple 0% Estate Estate Financing Cash To Seller 0% Cash To Seller 0% Conditions of Sale Arm's Length 0% Arm's Length 0% Date of Sale (Time) 01-2002 0% 02-2001 0% VALUE AFTER TRANS. ADJUST. $32,862 $43,636 ($/UNIT) Location Inferior 30% Inferior 10% Number of Units 308 138 0% 220 0% Quality / Appeal Good Inferior 20% Inferior 10% Age / Condition 1972 1972 / Good 0% 1974 / Good 0% Occupancy at Sale 94% 91% 0% 93% 0% Amenities Good Inferior 5% Inferior 5% Average Unit Size (SF) 1,246 1,075 0% 1,000 0% ------------------------------------------------------------------------------------------------ PHYSICAL ADJUSTMENT 55% 25% ------------------------------------------------------------------------------------------------ FINAL ADJUSTED VALUE ($/UNIT) $50,937 $54,545 ------------------------------------------------------------------------------------------------ COMPARABLE COMPARABLE COMPARABLE DESCRIPTION I - 3 I - 4 I - 5 --------------------------------------------------------------------------------------------------- Property Name Stoneycreek St. Andrews Broad River Trace Address 18 Berry Hill Road 601 St. Andrews Road 551 River Hill Circle City Columbia, SC Columbia, SC Columbia, SC Sale Date February, 2001 September, 2000 April, 2000 Sale Price ($) $7,249,000 $8,000,000 $13,600,000 Net Rentable Area (SF) 183,724 255,650 257,340 Number of Units 196 224 240 Price Per Unit $36,985 $35,714 $56,667 Year Built 1969 1973 1998 Land Area (Acre) 10.5700 16.8600 38.7400 VALUE ADJUSTMENTS DESCRIPTION ADJ. DESCRIPTION ADJ. DESCRIPTION ADJ. --------------------------------------------------------------------------------------------------- Property Rights Conveyed Fee Simple Estate 0% Fee Simple Estate 0% Fee Simple 0% Estate 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) 02-2001 0% 09-2000 5% 04-2000 5% VALUE AFTER TRANS. ADJUST. $36,985 $37,500 $59,500 ($/UNIT) Location Inferior 10% Comparable 0% Inferior 10% Number of Units 196 0% 224 0% 240 0% Quality / Appeal Inferior 20% Inferior 20% Superior -10% Age / Condition 1969 / Good 0% 1973 / Good 0% 1998 / -10% Excellent Occupancy at Sale 96% 0% 90% 0% 97% 0% Amenities Inferior 5% Comparable 0% Superior -5% Average Unit Size (SF) 937 5% 1,141 0% 1,072 0% --------------------------------------------------------------------------------------------------- PHYSICAL ADJUSTMENT 40% 20% -15% --------------------------------------------------------------------------------------------------- FINAL ADJUSTED VALUE ($/UNIT) $51,779 $45,000 $50,575 ---------------------------------------------------------------------------------------------------
SUMMARY VALUE RANGE (PER UNIT) $45,000 TO $54,545 MEAN (PER UNIT) $50,567 MEDIAN (PER UNIT) $50,937 VALUE CONCLUSION (PER UNIT) $50,000
VALUE INDICATED BY SALES COMPARISON APPROACH $15,400,000 ROUNDED $15,400,000
NET OPERATING INCOME (NOI) ANALYSIS We have also conducted a net operating income (NOI) comparison analysis. The NOI effectively takes into account the various physical, location, and operating aspects of the sale. When the subject's NOI is compared to the sale NOI, a percent adjustment can be arrived at. The following table illustrates this analysis. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 24 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA NOI PER UNIT COMPARISON
SALE PRICE NOI/ SUBJECT NOI COMPARABLE NO. OF ---------- -------- -------------- ADJUSTMENT INDICATED NO. UNITS PRICE/UNIT OAR NOI/UNIT SUBJ. NOI/UNIT FACTOR VALUE/UNIT ---------- ------ ----------- ---------- ---------- -------------- ---------- ---------- I-1 138 $ 4,535,000 9.72% $ 440,989 $ 1,353,533 1.375 $45,193 $ 32,862 $ 3,196 $ 4,395 I-2 220 $ 9,600,000 8.08% $ 775,671 $ 1,353,533 1.246 $54,389 $ 43,636 $ 3,526 $ 4,395 I-3 196 $ 7,249,000 8.55% $ 619,746 $ 1,353,533 1.390 $51,402 $ 36,985 $ 3,162 $ 4,395 I-4 224 $ 8,000,000 9.82% $ 785,376 $ 1,353,533 1.253 $44,764 $ 35,714 $ 3,506 $ 4,395 I-5 240 $13,600,000 8.94% $1,215,993 $ 1,353,533 0.867 $49,150 $ 56,667 $ 5,067 $ 4,395
PRICE/UNIT Low High Average Median $44,764 $54,389 $48,980 $49,150
VALUE ANALYSIS BASED ON COMPARABLES NOI PER UNIT Estimated Price Per Unit $ 52,000 Number of Units 308 ----------- Value Based on NOI Analysis $16,016,000 Rounded $16,000,000
The adjusted sales indicate a range of value between $44,764 and $54,389 per unit, with an average of $48,980 per unit. Based on the subject's competitive position within the improved sales, a value of $52,000 per unit is estimated. This indicates an "as is" market value of $16,000,000 (rounded after necessary adjustment, if any) for the NOI Per Unit Analysis. EFFECTIVE GROSS INCOME MULTIPLIER (EGIM) ANALYSIS The effective gross income multiplier (EGIM) is derived by dividing the sales price by the total effective gross income. The following table illustrates the EGIMs for the comparable improved sales. AMERICAN APPRAISAL ASSOCIATES, INC. SALES COMPARISON APPROACH PAGE 25 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA EFFECTIVE GROSS INCOME MULTIPLIER COMPARISON
SALE PRICE COMPARABLE NO. OF ------------ EFFECTIVE OPERATING SUBJECT NO. UNITS PRICE/UNIT GROSS INCOME EXPENSE OER PROJECTED OER EGIM ---------- ------ ------------ ------------ --------- ----- ------------- ---- I-1 138 $ 4,535,000 $ 923,989 $483,000 52.27% 4.91 $ 32,862 I-2 220 $ 9,600,000 $1,436,471 $660,800 46.00% 6.68 $ 43,636 I-3 196 $ 7,249,000 $1,252,678 $632,932 50.53% 5.79 43.28% $ 36,985 I-4 224 $ 8,000,000 $1,570,752 $785,376 50.00% 5.09 $ 35,714 I-5 240 $13,600,000 $2,055,470 $839,477 40.84% 6.62 $ 56,667
EGIM Low High Average Median 4.91 6.68 5.82 5.79
VALUE ANALYSIS BASED ON EGIM'S OF COMPARABLE SALES Estimate EGIM 6.00 Subject EGI $ 2,522,224 ----------- Value Based on EGIM Analysis $15,133,344 Rounded $15,100,000 Value Per Unit $ 49,026
There is an inverse relationship,which generally holds among EGIMs and operating expenses. Properties, which have higher expense ratios, typically sell for relatively less and therefore produce a lower EGIM. As will be illustrated in the Income Capitalization Approach of this report, the subject's operating expense ratio (OER) is estimated at 43.28% before reserves. The comparable sales indicate a range of expense ratios from 40.84% to 52.27%, while their EGIMs range from 4.91 to 6.68. Overall, we conclude to an EGIM of 6.00, which results in an "as is" value estimate in the EGIM Analysis of $15,100,000. 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 $15,500,000. Price Per Unit $15,400,000 NOI Per Unit $16,000,000 EGIM Analysis $15,100,000 Sales Comparison Conclusion $15,500,000
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 26 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA INCOME CAPITALIZATION APPROACH The income capitalization approach is based on the premise that value is created by the expectation of future benefits. We estimated the present value of those benefits to derive an indication of the amount that a prudent, informed purchaser-investor would pay for the right to receive them as of the date of value. This approach requires an estimate of the NOI of a property. The estimated NOI is then converted to a value indication by use of either the direct capitalization or the discounted cash flow analysis (yield capitalization). Direct capitalization uses a single year's stabilized NOI as a basis for a value indication by dividing the income by a capitalization rate. The rate chosen accounts for a recapture of the investment by the investor and should reflect all factors that influence the value of the property, such as tenant quality, property condition, neighborhood change, market trends, interest rates, and inflation. The rate may be extracted from local market transactions or, when transaction evidence is lacking, obtained from trade sources. A discounted cash flow analysis focuses on the operating cash flows expected from the property and the proceeds of a hypothetical sale at the end of a holding period (the reversion). The cash flows and reversion are discounted to their present values using a market-derived discount rate and are added together to obtain a value indication. Because benefits to be received in the future are worth less than the same benefits received in the present, this method weights income in the early years more heavily than the income and the sale proceeds to be received later. The strength of the discounted cash flow method is its ability to recognize variations in projected net income, such as those caused by inflation, stepped leases, neighborhood change, or tenant turnover. Its weakness is that it requires many judgments regarding the actions of likely buyers and sellers of the property in the future. In some situations, both methods yield a similar result. The discounted cash flow method is typically more appropriate for the analysis of investment properties with multiple or long-term leases, particularly leases with cancellation clauses or renewal options. It is especially useful for multi-tenant properties in volatile markets. The direct capitalization AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 27 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 -------------------------- --------- -------- ------ ---------- 1Br/1Ba - 1A10 (Pine) 960 $605 $0.63 91.7% 1Br/1Ba - 1B10 (Birch) 985 $606 $0.62 87.5% 2Br/2Ba - 2A20 (Maple) 1200 $662 $0.55 93.8% 2Br/2Ba - 2B20 (Oak) 1295 $669 $0.52 100.0% 2Br/1.5Ba - 2A15 (Aspen) 1370 $709 $0.52 97.2% 2Br/1.5Ba - 2B15 (Bradford) 1394 $688 $0.49 89.3% 3Br/2Ba - 3A20 (Palmetto) 1260 $795 $0.63 97.5% 3Br/2Ba - 3B20 (Elm) 1583 $897 $0.57 100.0% 3Br/2.5Ba - 3A25 (Mulberry) 1595 $911 $0.57 100.0%
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 28 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA RENT ANALYSIS
COMPARABLE RENTS ----------------------------------------------------- R-1 R-2 R-3 R-4 R-5 ----------------------------------------------------- Ashland Churchill at St. Andrews Commons St. Andrews Landmark Stoneycreek Commons ---------------------------------------------------- SUBJECT SUBJECT COMPARISON TO SUBJECT SUBJECT UNIT ACTUAL ASKING ---------------------------------------------------- DESCRIPTION TYPE RENT RENT Inferior Similar Similar Inferior Similar -------------------------------------------------------------------------------------------------------------------------------- Monthly Rent 1Br/1Ba - 1A10 $ 605 $ 619 $ 500 $ 525 $ 530 $ 498 $ 563 Unit Area (SF) (PINE) 960 960 652 720 700 775 744 Monthly Rent Per Sq. Ft. $ 0.63 $ 0.64 $0.77 $ 0.73 $ 0.76 $ 0.64 $ 0.76 Monthly Rent 1Br/1Ba - 1B10 $ 606 $ 639 $ 650 Unit Area (SF) (BIRCH) 985 985 1,142 Monthly Rent Per Sq. Ft. $ 0.62 $ 0.65 $ 0.57 Monthly Rent 2Br/2Ba - 2A20 $ 662 $ 709 $ 612 $ 639 $ 730 $ 599 $ 670 Unit Area (SF) (MAPLE) 1,200 1,200 969 1,074 1,292 1,060 1,023 Monthly Rent Per Sq. Ft. $ 0.55 $ 0.59 $0.63 $ 0.59 $ 0.57 $ 0.57 $ 0.65 Monthly Rent 2Br/2Ba - 2B20 $ 669 $ 739 Unit Area (SF) (OAK) 1,295 1,295 Monthly Rent Per Sq. Ft. $ 0.52 $ 0.57 Monthly Rent 2Br/1.5Ba - $ 709 $ 729 $ 650 Unit Area (SF) 2A15 (ASPEN) 1,370 1,370 1,187 Monthly Rent Per Sq. Ft. $ 0.52 $ 0.53 $ 0.55 Monthly Rent 2Br/1.5Ba - 2B15 $ 688 $ 719 Unit Area (SF) (BRADFORD) 1,394 1,394 Monthly Rent Per Sq. Ft. $ 0.49 $ 0.52 Monthly Rent 3Br/2Ba - 3A20 $ 795 $ 789 $ 732 Unit Area (SF) (PALMETTO) 1,260 1,260 1,315 Monthly Rent Per Sq. Ft. $ 0.63 $ 0.63 $ 0.56 Monthly Rent 3Br/2Ba - 3B20 $ 897 $ 909 Unit Area (SF) (ELM) 1,583 1,583 Monthly Rent Per Sq. Ft. $ 0.57 $ 0.57 Monthly Rent 3Br/2.5Ba - $ 911 $ 959 Unit Area (SF) 3A25 (MULBERRY) 1,595 1,595 Monthly Rent Per Sq. Ft. $ 0.57 $ 0.60 DESCRIPTION MIN MAX MEDIAN AVERAGE -------------------------------------------------------------------------- Monthly Rent $ 498 $ 563 $ 525 $ 523 Unit Area (SF) 652 775 720 718 Monthly Rent Per Sq. Ft. $ 0.64 $ 0.77 $ 0.76 $ 0.73 Monthly Rent $ 650 $ 650 $ 650 $ 650 Unit Area (SF) 1,142 1,142 1,142 1,142 Monthly Rent Per Sq. Ft. $ 0.57 $ 0.57 $ 0.57 $ 0.57 Monthly Rent $ 599 $ 730 $ 639 $ 650 Unit Area (SF) 969 1,292 1,060 1,084 Monthly Rent Per Sq. Ft. $ 0.57 $ 0.65 $ 0.59 $ 0.60 Monthly Rent Unit Area (SF) Monthly Rent Per Sq. Ft. Monthly Rent $ 650 $ 650 $ 650 $ 650 Unit Area (SF) 1,187 1,187 1,187 1,187 Monthly Rent Per Sq. Ft. $ 0.55 $ 0.55 $ 0.55 $ 0.55 Monthly Rent Unit Area (SF) Monthly Rent Per Sq. Ft. Monthly Rent $ 732 $ 732 $ 732 $ 732 Unit Area (SF) 1,315 1,315 1,315 1,315 Monthly Rent Per Sq. Ft. $ 0.56 $ 0.56 $ 0.56 $ 0.56 Monthly Rent Unit Area (SF) Monthly Rent Per Sq. Ft. Monthly Rent Unit Area (SF) Monthly Rent Per Sq. Ft.
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: AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 29 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 - 1A10 (Pine) 72 960 $ 610 $ 0.64 $ 43,920 $ 527,040 1Br/1Ba - 1B10 (Birch) 8 985 $ 620 $ 0.63 $ 4,960 $ 59,520 2Br/2Ba - 2A20 (Maple) 48 1,200 $ 690 $ 0.58 $ 33,120 $ 397,440 2Br/2Ba - 2B20 (Oak) 16 1,295 $ 720 $ 0.56 $ 11,520 $ 138,240 2Br/1.5Ba - 2A15 (Aspen) 36 1,370 $ 720 $ 0.53 $ 25,920 $ 311,040 56 1,394 $ 700 $ 0.50 $ 39,200 $ 470,400 2Br/1.5Ba2B15(Bradford) 3Br/2Ba - 3A20 (Palmetto) 40 1,260 $ 790 $ 0.63 $ 31,600 $ 379,200 3Br/2Ba - 3B20 (Elm) 20 1,583 $ 900 $ 0.57 $ 18,000 $ 216,000 [ILLEGIBLE] 12 1,595 $ 920 $ 0.58 $ 11,040 $ 132,480 ----------------------------------- Total $ 219,280 $2,631,360 ===================================
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 30 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 $2,478,918 $8,048 $2,559,448 $8,310 $2,516,265 $8,170 Vacancy $ 190,983 $ 620 $ 164,811 $ 535 $ 278,106 $ 903 Credit Loss/Concessions $ 146,156 $ 475 $ 138,510 $ 450 $ 146,644 $ 476 ----------------------------------------------------------------- Subtotal $ 337,139 $1,095 $ 303,321 $ 985 $ 424,750 $1,379 Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 60,256 $ 196 $ 127,835 $ 415 $ 210,246 $ 683 ----------------------------------------------------------------- Subtotal Other Income $ 60,256 $ 196 $ 127,835 $ 415 $ 210,246 $ 683 ----------------------------------------------------------------- Effective Gross Income $2,202,035 $7,149 $2,383,962 $7,740 $2,301,761 $7,473 Operating Expenses Taxes $ 153,712 $ 499 $ 200,791 $ 652 $ 227,742 $ 739 Insurance $ 40,808 $ 132 $ 59,759 $ 194 $ 63,059 $ 205 Utilities $ 172,149 $ 559 $ 175,993 $ 571 $ 183,284 $ 595 Repair & Maintenance $ 211,569 $ 687 $ 209,205 $ 679 $ 215,543 $ 700 Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 30,292 $ 98 $ 24,483 $ 79 $ 28,453 $ 92 General Administrative $ 276,801 $ 899 $ 294,461 $ 956 $ 219,029 $ 711 Management $ 114,710 $ 372 $ 125,501 $ 407 $ 119,794 $ 389 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------- Total Operating Expenses $1,000,041 $3,247 $1,090,193 $3,540 $1,056,904 $3,432 Reserves $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 ----------------------------------------------------------------- Net Income $1,201,994 $3,903 $1,293,769 $4,201 $1,244,857 $4,042 ----------------------------------------------------------------- FISCAL YEAR 2003 ANNUALIZED 2003 -------------------------------------------- MANAGEMENT BUDGET PROJECTION AAA PROJECTION -------------------------------------------- ------------------------- DESCRIPTION TOTAL PER UNIT TOTAL PER UNIT TOTAL PER UNIT % ------------------------------------------------------------------------------------------------------ Revenues Rental Income $2,452,283 $7,962 $2,458,464 $7,982 $2,631,360 $8,543 100.0% Vacancy $ 191,000 $ 620 $ 227,520 $ 739 $ 210,509 $ 683 8.0% Credit Loss/Concessions $ 54,200 $ 176 $ 89,216 $ 290 $ 52,627 $ 171 2.0% ------------------------------------------------------------------------- Subtotal $ 245,200 $ 796 $ 316,736 $1,028 $ 263,136 $ 854 10.0% Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% Other Misc. Revenue $ 144,900 $ 470 $ 167,064 $ 542 $ 154,000 $ 500 5.9% ------------------------------------------------------------------------- Subtotal Other Income $ 144,900 $ 470 $ 167,064 $ 542 $ 154,000 $ 500 5.9% ------------------------------------------------------------------------- Effective Gross Income $2,351,983 $7,636 $2,308,792 $7,496 $2,522,224 $8,189 100.0% Operating Expenses Taxes $ 202,760 $ 658 $ 204,728 $ 665 $ 221,760 $ 720 8.8% Insurance $ 68,870 $ 224 $ 67,120 $ 218 $ 67,760 $ 220 2.7% Utilities $ 180,000 $ 584 $ 215,724 $ 700 $ 184,800 $ 600 7.3% Repair & Maintenance $ 198,500 $ 644 $ 205,016 $ 666 $ 231,000 $ 750 9.2% Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% Marketing & Leasing $ 19,500 $ 63 $ 9,288 $ 30 $ 21,560 $ 70 0.9% General Administrative $ 235,470 $ 765 $ 241,968 $ 786 $ 238,700 $ 775 9.5% Management $ 116,693 $ 379 $ 123,644 $ 401 $ 126,111 $ 409 5.0% Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 0.0% ------------------------------------------------------------------------- Total Operating Expenses $1,021,793 $3,318 $1,067,488 $3,466 $1,091,691 $3,544 43.3% Reserves $ 0 $ 0 $ 0 $ 0 $ 77,000 $ 250 7.1% ------------------------------------------------------------------------- Net Income $1,330,190 $4,319 $1,241,304 $4,030 $1,353,533 $4,395 53.7% -------------------------------------------------------------------------
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 10% based on the subject's historical performance, as well as the anticipated future market conditions. AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 31 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 32 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA SUMMARY OF OVERALL CAPITALIZATION RATES
COMP. NO. SALE DATE OCCUP. PRICE/UNIT OAR --------------------------------------------------------------- I-1 Jan-02 91% $32,862 9.72% I-2 Feb-01 93% $43,636 8.08% I-3 Feb-01 96% $36,985 8.55% I-4 Sep-00 90% $35,714 9.82% I-5 Apr-00 97% $56,667 8.94% High 9.82% Low 8.08% Average 9.02%
Based on this information, we have concluded the subject's overall capitalization rate should be 8.50%. 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 11.00%. 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 11.00% indicates a value of $15,800,000. In this instance, the reversion figure contributes AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 33 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA approximately 40% 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 34 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA DISCOUNTED CASH FLOW ANALYSIS WOODLAND VILLAGE APARTMENTS
YEAR APR-2004 APR-2005 APR-2006 APR-2007 APR-2008 APR-2009 FISCAL YEAR 1 2 3 4 5 6 --------------------------------------------------------------------------------------------------------------------- REVENUE Base Rent $2,631,360 $2,710,301 $2,791,610 $2,875,358 $2,961,619 $3,050,467 Vacancy $ 210,509 $ 216,824 $ 223,329 $ 230,029 $ 236,930 $ 244,037 Credit Loss $ 52,627 $ 54,206 $ 55,832 $ 57,507 $ 59,232 $ 61,009 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 -------------------------------------------------------------------------------- Subtotal $ 263,136 $ 271,030 $ 279,161 $ 287,536 $ 296,162 $ 305,047 Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 154,000 $ 158,620 $ 163,379 $ 168,280 $ 173,328 $ 178,528 -------------------------------------------------------------------------------- Subtotal Other Income $ 154,000 $ 158,620 $ 163,379 $ 168,280 $ 173,328 $ 178,528 -------------------------------------------------------------------------------- EFFECTIVE GROSS INCOME $2,522,224 $2,597,891 $2,675,827 $2,756,102 $2,838,785 $2,923,949 OPERATING EXPENSES: Taxes $ 221,760 $ 228,413 $ 235,265 $ 242,323 $ 249,593 $ 257,081 Insurance $ 67,760 $ 69,793 $ 71,887 $ 74,043 $ 76,264 $ 78,552 Utilities $ 184,800 $ 190,344 $ 196,054 $ 201,936 $ 207,994 $ 214,234 Repair & Maintenance $ 231,000 $ 237,930 $ 245,068 $ 252,420 $ 259,993 $ 267,792 Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Security $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 21,560 $ 22,207 $ 22,873 $ 23,559 $ 24,266 $ 24,994 General Administrative $ 238,700 $ 245,861 $ 253,237 $ 260,834 $ 268,659 $ 276,719 Management $ 126,111 $ 129,895 $ 133,791 $ 137,805 $ 141,939 $ 146,197 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 -------------------------------------------------------------------------------- TOTAL OPERATING EXPENSES $1,091,691 $1,124,442 $1,158,175 $1,192,920 $1,228,708 $1,265,569 Reserves $ 77,000 $ 79,310 $ 81,689 $ 84,140 $ 86,664 $ 89,264 -------------------------------------------------------------------------------- NET OPERATING INCOME $1,353,533 $1,394,139 $1,435,963 $1,479,042 $1,523,413 $1,569,115 Operating Expense Ratio (% of EGI) 43.3% 43.3% 43.3% 43.3% 43.3% 43.3% Operating Expense Per Unit $ 3,544 $ 3,651 $ 3,760 $ 3,873 $ 3,989 $ 4,109 YEAR APR-2010 APR-2011 APR-2012 APR-2013 APR-2014 FISCAL YEAR 7 8 9 10 11 ------------------------------------------------------------------------------------------------------- REVENUE Base Rent $3,141,981 $3,236,241 $3,333,328 $3,433,328 $3,536,328 Vacancy $ 251,359 $ 258,899 $ 266,666 $ 274,666 $ 282,906 Credit Loss $ 62,840 $ 64,725 $ 66,667 $ 68,667 $ 70,727 Concessions $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------ Subtotal $ 314,198 $ 323,624 $ 333,333 $ 343,333 $ 353,633 Laundry Income $ 0 $ 0 $ 0 $ 0 $ 0 Garage Revenue $ 0 $ 0 $ 0 $ 0 $ 0 Other Misc. Revenue $ 183,884 $ 189,401 $ 195,083 $ 200,935 $ 206,963 ------------------------------------------------------------------ Subtotal Other Income $ 183,884 $ 189,401 $ 195,083 $ 200,935 $ 206,963 ------------------------------------------------------------------ EFFECTIVE GROSS INCOME $3,011,667 $3,102,017 $3,195,078 $3,290,930 $3,389,658 OPERATING EXPENSES: Taxes $ 264,793 $ 272,737 $ 280,919 $ 289,347 $ 298,027 Insurance $ 80,909 $ 83,336 $ 85,836 $ 88,411 $ 91,064 Utilities $ 220,661 $ 227,281 $ 234,099 $ 241,122 $ 248,356 Repair & Maintenance $ 275,826 $ 284,101 $ 292,624 $ 301,403 $ 310,445 Cleaning $ 0 $ 0 $ 0 $ 0 $ 0 Landscaping $ 0 $ 0 $ 0 $ 0 $ 0 Security $ 0 $ 0 $ 0 $ 0 $ 0 Marketing & Leasing $ 25,744 $ 26,516 $ 27,312 $ 28,131 $ 28,975 General Administrative $ 285,020 $ 293,571 $ 302,378 $ 311,449 $ 320,793 Management $ 150,583 $ 155,101 $ 159,754 $ 164,547 $ 169,483 Miscellaneous $ 0 $ 0 $ 0 $ 0 $ 0 ------------------------------------------------------------------ TOTAL OPERATING EXPENSES $1,303,536 $1,342,642 $1,382,922 $1,424,409 $1,467,142 Reserves $ 91,942 $ 94,700 $ 97,541 $ 100,468 $ 103,482 ------------------------------------------------------------------ NET OPERATING INCOME $1,616,189 $1,664,675 $1,714,615 $1,766,053 $1,819,035 Operating Expense Ratio (% of EGI) 43.3% 43.3% 43.3% 43.3% 43.3% Operating Expense Per Unit $ 4,232 $ 4,359 $ 4,490 $ 4,625 $ 4,763
Estimated Stabilized NOI $1,353,533 Sales Expense Rate 2.00% Months to Stabilized 0 Discount Rate 11.00% Stabilized Occupancy 92.0% Terminal Cap Rate 10.00%
Gross Residual Sale Price $18,190,349 Deferred Maintenance $ 0 Less: Sales Expense $ 363,807 Add: Excess Land $ 0 ----------- Net Residual Sale Price $17,826,542 Other Adjustments $ 0 ----------- PV of Reversion $ 6,278,231 Value Indicated By "DCF" $15,766,593 Add: NPV of NOI $ 9,488,361 Rounded $15,800,000 ----------- PV Total $15,766,593
"DCF" VALUE SENSITIVITY TABLE
DISCOUNT RATE ------------------------------------------------------------------------------------------------------------------------ TOTAL VALUE 10.50% 10.75% 11.00% 11.25% 11.50% ------------------------------------------------------------------------------------------------------------------------ 9.50% $16,631,217 $16,361,178 $16,097,026 $15,838,612 $15,585,792 9.75% $16,453,938 $16,187,861 $15,927,573 $15,672,929 $15,423,786 TERMINAL CAP RATE 10.00% $16,285,524 $16,023,210 $15,766,593 $15,515,529 $15,269,881 10.25% $16,125,325 $15,866,590 $15,613,465 $15,365,808 $15,123,483 10.50% $15,972,754 $15,717,429 $15,467,629 $15,223,217 $14,984,057
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 35 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 8.50% percent is applicable to the subject. The results of our direct capitalization analysis are as follows: AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 36 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA WOODLAND VILLAGE APARTMENTS
TOTAL PER SQ. FT. PER UNIT %OF EGI -------------------------------------------------------------------------------------------------- REVENUE Base Rent $ 2,631,360 $ 6.85 $ 8,543 Less: Vacancy & Collection Loss 10.00% $ 263,136 $ 0.69 $ 854 Plus: Other Income Laundry Income $ 0 $ 0.00 $ 0 0.00% Garage Revenue $ 0 $ 0.00 $ 0 0.00% Other Misc. Revenue $ 154,000 $ 0.40 $ 500 6.11% ---------------------------------------------- Subtotal Other Income $ 154,000 $ 0.40 $ 500 6.11% EFFECTIVE GROSS INCOME $ 2,522,224 $ 6.57 $ 8,189 OPERATING EXPENSES: Taxes $ 221,760 $ 0.58 $ 720 8.79% Insurance $ 67,760 $ 0.18 $ 220 2.69% Utilities $ 184,800 $ 0.48 $ 600 7.33% Repair & Maintenance $ 231,000 $ 0.60 $ 750 9.16% Cleaning $ 0 $ 0.00 $ 0 0.00% Landscaping $ 0 $ 0.00 $ 0 0.00% Security $ 0 $ 0.00 $ 0 0.00% Marketing & Leasing $ 21,560 $ 0.06 $ 70 0.85% General Administrative $ 238,700 $ 0.62 $ 775 9.46% Management 5.00% $ 126,111 $ 0.33 $ 409 5.00% Miscellaneous $ 0 $ 0.00 $ 0 0.00% TOTAL OPERATING EXPENSES $ 1,091,691 $ 2.84 $ 3,544 43.28% Reserves $ 77,000 $ 0.20 $ 250 3.05% ---------------------------------------------- NET OPERATING INCOME $ 1,353,533 $ 3.53 $ 4,395 53.66% ---------------------------------------------- "GOING IN" CAPITALIZATION RATE 8.50% VALUE INDICATION $15,923,915 $ 41.48 $51,701 "AS IS" VALUE INDICATION (DIRECT CAPITALIZATION APPROACH) $15,923,915 ROUNDED $15,900,000 $ 41.42 $51,623
AMERICAN APPRAISAL ASSOCIATES, INC. INCOME CAPITALIZATION APPROACH PAGE 37 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA DIRECT CAPITALIZATION VALUE SENSITIVITY TABLE
CAP RATE VALUE ROUNDED $/UNIT $/SF ------------------------------------------------------------------------- 7.75% $17,464,939 $17,500,000 $56,818 $45.58 8.00% $16,919,160 $16,900,000 $54,870 $44.02 8.25% $16,406,458 $16,400,000 $53,247 $42.72 8.50% $15,923,915 $15,900,000 $51,623 $41.42 8.75% $15,468,946 $15,500,000 $50,325 $40.37 9.00% $15,039,253 $15,000,000 $48,701 $39.07 9.25% $14,632,787 $14,600,000 $47,403 $38.03
CONCLUSION BY THE DIRECT CAPITALIZATION METHOD Applying the capitalization rate to our estimated NOI results in an estimated value of $15,900,000. CORRELATION AND CONCLUSION BY THE INCOME APPROACH The two methods used to estimate the market value of the subject property by the income approach resulted in the following indications of value: Discounted Cash Flow Analysis $15,800,000 Direct Capitalization Method $15,900,000
Giving consideration to the indicated values provided by both techniques, we have concluded the estimated value by the income capitalization approach to be $15,900,000. AMERICAN APPRAISAL ASSOCIATES, INC. RECONCILIATION AND CONCLUSION PAGE 38 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 $ 15,500,000 Income Approach $ 15,900,000 Reconciled Value $ 15,900,000
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 27, 2003 the market value of the fee simple estate in the property is: $15,900,000 AMERICAN APPRAISAL ASSOCIATES, INC. ADDENDA WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA ADDENDA AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA EXHIBIT A SUBJECT PHOTOGRAPHS AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA SUBJECT PHOTOGRAPHS [ENTRANCE FROM BUSH RIVER ROAD PICTURE] [STREET SCENE - SUBJECT IS TO THE LEFT PICTURE] [EXTERIOR - APARTMENT BUILDING PICTURE] [EXTERIOR - APARTMENT BUILDING PICTURE] [EXTERIOR - APARTMENT BUILDING PICTURE] [POOL PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT A WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA SUBJECT PHOTOGRAPHS [TENNIS COURTS PICTURE] [INTERIOR - LIVING ROOM PICTURE] [INTERIOR - KITCHEN PICTURE] [INTERIOR - BATHROOM PICTURE] [INTERIOR - BEDROOM PICTURE] [INTERIOR - BEDROOM PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA EXHIBIT B SUMMARY OF RENT COMPARABLES AND PHOTOGRAPH OF COMPARABLES AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA PHOTOGRAPHS OF COMPARABLE SALE PROPERTIES COMPARABLE I-1 RAINTREE 3500 Fernandina Road Columbia, SC [PICTURE] COMPARABLE I-2 ASHTON AT LONGCREEK 1401 Longcreek Drive Columbia, SC [PICTURE] COMPARABLE I-3 STONEYCREEK 18 Berry Hill Road Columbia, SC [PICTURE] COMPARABLE I-4 ST. ANDREWS 601 St. Andrews Road Columbia, SC [PICTURE] COMPARABLE I-5 BROAD RIVER TRACE 551 River Hill Circle Columbia, SC [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA SUMMARY OF COMPARABLE RENTAL PROPERTIES
COMPARABLE DESCRIPTION SUBJECT R - 1 ------------------------------ ---------------------------------------------- --------------------------------------------- Property Name Woodland Village Apartments Ashland Commons Management Company AIMCO Carter-Haston LOCATION: Address 2221 Bush River Road 2400 Ashland Road City, State Columbia, South Carolina Columbia, SC County Lexington Lexington Proximity to Subject 1/2 mile west of the subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 383,904 103,488 Year Built 1972 1972 Effective Age 20 20 Building Structure Type Brick & wood siding walls; asphalt Brick & wood siding walls; asphalt shingle roof Parking Type (Gr.,Cov., etc.) shingle roof Open Open Number of Units 308 112 Unit Mix: Type Unit Qty Mo Rent Type Unit Qty Mo 1 1Br/1Ba - 1A10 (Pine) 960 72 $605 1 2BD/1BA 652 16 $500 2 1Br/1Ba - 1B10 (Birch) 985 8 $606 3 1BD/2BA - Type 1 966 88 $610 3 2Br/2Ba - 2A20 (Maple) 1,200 48 $662 2BD/2.5BA Type 2 1,003 8 $630 4 2Br/2Ba - 2B20 (Oak) 1,295 16 $669 5 2Br/1.5Ba - 2A15 (Aspen) 1,370 36 $709 6 2Br/1.5Ba - 2B15 1,394 56 $688 (Bradfort) 7 3Br/2Ba - 3A20 (Palmetto) 1,260 40 $795 8 3Br/2Ba - 3B20 (Elm) 1,583 20 $897 9 3Br/2.5Ba - 3A25 (Maple) 1,595 12 $911 Average Unit Size (SF) 1,246 924 Unit Breakdown: Efficiency 0% 2-Bedroom 51% Efficiency 0% 2-Bedroom 86% 1-Bedroom 26% 3-Bedroom 23% 1-Bedroom 14% 3-Bedroom CONDITION: Good Good APPEAL: Good Good 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 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 BBQ Equipment X Basketball Court BBQ Equipment Volleyball Court Theater Room Volleyball Court Theater Room Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall X Tennis Court Secured Parking X Tennis Court Secured Parking Racquet Ball X Laundry Room Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track X Business Office Gym Room Gym Room OCCUPANCY: 94% 90% LEASING DATA: Available Leasing Terms 6 to 15 months 6 and 12 Months Concessions $50 off select units 1/2 month free for 2BR plan Pet Deposit $400 $150 pet Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas X Water Trash Water Trash Confirmation May 27, 2003; (Property Manager) June 4, 2003; (Property Manager) Telephone Number (803) 772-5737 (803) 772-2249 NOTES: None COMPARISON TO SUBJECT: Inferior COMPARABLE COMPARABLE DESCRIPTION R - 2 R - 3 ------------------------------ ---------------------------------------------- --------------------------------------------- Property Name Churchill at St. Andrews Landmark Management Company Churchill Forge Properties Minchew Corporation LOCATION: Address 82 Foxrun Lane 19 Landmark Drive City, State Columbia, SC Columbia, SC County Lexington Lexington Proximity to Subject 1 mile west of the subject 1/2 mile north of the subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 515,236 364,896 Year Built 1972 1972 Effective Age 20 20 Building Structure Type Brick & wood siding walls; asphalt Brick & wood siding walls; asphalt shingle roof Parking Type (Gr.,Cov., etc.) shingle roof Open Open Number of Units 132 336 Unit Mix: Type Unit Qty Mo Type Unit Qty Mo 1 1BD/1BA 720 16 $525 1 1BD/1BA 700 64 $530 3 2BR/2BA 1,008 40 $620 2 2BD/1.5BA 1,142 208 $650 3 2BR/2.5BA 1,148 36 $660 3 3BD/2BA 1,292 64 $730 7 3BR/2BA 1,296 24 $720 7 3BR/2.5BA 1,344 16 $750 Average Unit Size (SF) 1,104 1,086 Unit Breakdown: Efficiency 0% 2-Bedroom 58% Efficiency 0% 2-Bedroom 62% 1-Bedroom 12% 3-Bedroom 30% 1-Bedroom 19% 3-Bedroom 19% CONDITION: Good Good APPEAL: Good Good 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 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 X Basketball Court BBQ Equipment Volleyball Court Theater Room X Volleyball Court Theater Room Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall X Tennis Court Secured Parking X Tennis Court Secured Parking Racquet Ball X Laundry Room Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track X Business Office Gym Room Gym Room OCCUPANCY: 89% 82% LEASING DATA: Available Leasing Terms 6 to 12 Months 6 and 12 Months Concessions 1/2 off first month's lease rate $50 off 2BR plan Pet Deposit $300 $300 Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas Water Trash Water Trash Confirmation June 4, 2003; (Property Manager) June 4, 2003; (Property Manager) Telephone Number (803) 798-2150 (803) 798-4400 NOTES: None None COMPARISON TO SUBJECT: Similar Similar COMPARABLE COMPARABLE DESCRIPTION R - 4 R - 5 ------------------------------ ---------------------------------------------- ----------------------------------------------- Property Name Stoneycreek St. Andrews Commons Management Company Intermark Management United Dominion Realty LOCATION: Address 18 Berry Hill Road 1200 St. Andrews Road City, State Columbia, SC Columbia, SC County Lexington Lexington Proximity to Subject 1 mile northeast of the subject 1 mile north of the subject PHYSICAL CHARACTERISTICS: Net Rentable Area (SF) 183,652 290,304 Year Built 1969 1987 Effective Age 25 10 Building Structure Type Brick & wood siding walls; asphalt Brick & wood siding walls; asphalt shingle roof Parking Type (Gr.,Cov., etc.) shingle roof Open Open Number of Units 196 336 Unit Mix: Type Unit Qty Mo Type Unit Qty Mo 1 1BD/1BA 775 88 $498 1 1BD/1BA 712 140 $557 5 2BD/1.5BA 1,187 8 $650 1 1BD/1BA - Type 2 855 40 $585 3 2BD/2BA 1,055 96 $598 0 2BD/1BA 905 28 $648 3 2BD/2BA 1,187 4 $630 3 2BR/2BA 1,023 128 $670 Average Unit Size (SF) 937 864 Unit Breakdown: Efficiency 0% 2-Bedroom 55% Efficiency 0% 2-Bedroom 46% 1-Bedroom 45% 3-Bedroom 1-Bedroom 54% 3-Bedroom 0% CONDITION: Good Good APPEAL: Good Good AMENITIES: Unit Amenities Attach. Garage Vaulted Ceiling Attach. Garage X Vaulted Ceiling X Balcony X W/D Connect. X Balcony X W/D Connect. 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 Sand Volley Ball Meeting Hall Sand Volley Ball Meeting Hall Tennis Court Secured Parking X Tennis Court Secured Parking Racquet Ball X Laundry Room X Racquet Ball X Laundry Room Jogging Track X Business Office Jogging Track X Business Office Gym Room X Gym Room OCCUPANCY: 90% 90% LEASING DATA: Available Leasing Terms 12 Months 6 to 15 Months Concessions $250 look & lease $200 off for 6-mos. Lease; $400 for 12-mos. Pet Deposit $250 $300 - $500 Utilities Paid by Tenant: X Electric X Natural Gas X Electric X Natural Gas Water Trash X Water Trash Confirmation June 4, 2003; (Property Manager) June 4, 2003; (Property Manager) Telephone Number (803) 772-4814 (803) 772-0040 NOTES: None Controlled access gates COMPARISON TO SUBJECT: Inferior Similar
AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT B WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA PHOTOGRAPHS OF COMPARABLE RENT PROPERTIES COMPARABLE R-1 ASHLAND COMMONS 2400 Ashland Road Columbia, SC [PICTURE] COMPARABLE R-2 CHURCHILL AT ST. ANDREWS 82 Foxrun Lane Columbia, SC [PICTURE] COMPARABLE R-3 LANDMARK 19 Landmark Drive Columbia, SC [PICTURE] COMPARABLE R-4 STONEYCREEK 18 Berry Hill Road Columbia, SC [PICTURE] COMPARABLE R-5 ST. ANDREWS COMMONS 1200 St. Andrews Road Columbia, SC [PICTURE] AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA EXHIBIT C ASSUMPTIONS AND LIMITING CONDITIONS (3 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT C WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA EXHIBIT D CERTIFICATE OF APPRAISER (1 PAGE) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT D CERTIFICATE OF APPRAISER I certify that, to the best of my knowledge and belief: The statements of fact contained in this report are true and correct. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and represent the unbiased professional analyses, opinions, and conclusions of American Appraisal Associates, Inc. American Appraisal Associates, Inc. and I personally, have no present or prospective interest in the property that is the subject of this report and have no personal interest or bias with respect to the parties involved. Compensation for American Appraisal Associates, Inc. is not contingent on an action or event resulting from the analyses, opinions, or conclusions in, or the use of, this report. The analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Uniform Standards of Professional Appraisal Practice and the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute. The use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. I personally did not inspect the subject property. Jimmy Pat James, MAI and David Johnsen, MAI 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 South Carolina Temporary Practice Permit #095-03 AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA EXHIBIT E QUALIFICATIONS OF APPRAISER (2 PAGES) AMERICAN APPRAISAL ASSOCIATES, INC. EXHIBIT E WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 -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. WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA GENERAL SERVICE CONDITIONS AMERICAN APPRAISAL ASSOCIATES, INC. WOODLAND VILLAGE APARTMENTS, COLUMBIA, SOUTH CAROLINA 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 Co-Clients will not be liable for any of our acts or omissions. AAA is an equal opportunity employer.