exv99wxcyx18y



Ms. Martha Long		December 8, 2006
General Partner
VMS National Properties JV
55 Beattie Place Greenville, SC 29601

Re: Crosswood Park Apartments 6801 San Tomas Drive
Citrus Heights, California

Dear Ms. Long:

At your request, KTR Valuation & Consulting Services, LLC has appraised the above referenced property. The purpose of the appraisal is to estimate the Market Value of the Fee Simple Estate of the subject property, free and clear of financing, as of November 30, 2006. The date of value corresponds to the date the subject property was most recently inspected by the appraiser.

The subject property consists of a 10.6-acre tract of land improved with a 180-unit garden-style apartment complex known as the Crosswood Park Apartments. Construction of the improvements was reportedly completed in 1976. The improvements were observed to be in good physical condition. Amenities common to all units include electric kitchen appliances, patios/balconies, wood-burning fireplaces and mini-blinds. Community amenities include on-site management/leasing office, swimming pool, fitness center, clubhouse, sauna, tennis courts and basketball court. The complex contains 194,982 rentable square feet, which suggests an average unit size of 1,083 square feet.

The following report contains information considered relevant to the valuation of the property and the methods by which collected data have been analyzed in arriving at our value conclusion. Our analysis included an inspection of the premises, interviews with knowledgeable market participants, a review of historical income and expense statements, the current rent roll, and other relevant financial and market information. As an income-producing property, greatest reliance is placed upon the value derived through the Income Capitalization Approach, with support provided by the conclusion rendered through implementation of the Sales Comparison Approach.

This appraisal report has been prepared in order to comply with the reporting requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice (USPAP) for a Complete Appraisal in Summary Report format. As such, it presents only summary discussions of the data, reasoning, and analyses that were used in the appraisal process to develop the appraiser’s opinion of value. Supporting documentation not presented herein has been retained in the appraiser’s file. The depth of discussion contained in this report is specific to the needs of the client and for the intended use stated herein.

224 South Michigan Avenue, Chicago, IL 60604
t e l 312.386.3192 f a x 312.386.9820
w w w . f i r s t a m . c o m

Ms. Martha Long
VMS National Properties
December 8, 2006
Page 2

The attached Summary Appraisal Report describes our investigation and analyses, together with Certification, Basic Assumptions and Limiting Conditions, upon which we have based our opinion that the market value of the Fee Simple Estate of the subject property, as of November 30, 2006, is:

FIFTEEN MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS
($15,750,000)

It has been a pleasure to be of service to you. Please do not hesitate to call with any questions you may have regarding our assumptions, observations or conclusion.


Very truly yours,

KTR VALUATION & CONSULTING SERVICES, LLC


By:		John Grochowiak
		Appraiser


By:		Dean Hobart, AIA
		Senior Managing Director – Vice President


By:		Steven J. Goldberg, MAI, CCIM
		Senior Managing Director – Vice President

224 South Michigan Avenue, Chicago, IL 60604
t e l 312.386.3192 f a x 312.386.9820
w w w . f i r s t a m . c o m


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page i

CERTIFICATE OF VALUE

We certify that to the best of our knowledge and belief:

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

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

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

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

Our analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) as promulgated by the Appraisal Standards Board of the Appraisal Foundation, the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute, and Title XI (and amendments) of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) effective August 9, 1990.

John Grochowiak made a personal inspection of the property that is the subject of this appraisal. Steven Goldberg and Dean Hobart did not inspect the subject property.

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

We have the knowledge and experience necessary to perform this appraisal assignment and have previously appraised this type of property.

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

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

KTR VALUATION & CONSULTING SERVICES, LLC



By:	John Grochowiak	By:	Dean Hobart, AIA	By:	Steven J. Goldberg, MAI, CCIM
	Appraiser		Senior Managing Director		Senior Managing Director
			Vice President		Vice President


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page ii

BASIC ASSUMPTIONS AND LIMITING CONDITIONS

This Appraisal Report is subject to underlying assumptions and limiting conditions qualifying the information contained in the Report as follows:

The valuation estimates apply only to the property specifically identified and described in the ensuing Report.

Information and data contained in the Report, although obtained from public record and other reliable sources and where possible, carefully checked by the Appraiser, are accepted as satisfactory evidence upon which rests the final expression of property value.

The Appraiser has made no legal survey nor has he commissioned one to be prepared and therefore, reference to a sketch, plat, diagram or previous survey appearing in the Report is only for the purpose of assisting the reader in visualizing the property.

It is assumed that all information known to the client and relative to the valuation have been accurately furnished and that there are no undisclosed leases, agreements, liens or other encumbrances affecting the use of the property.

Ownership and management are assumed to be competent and in responsible hands.

No responsibility beyond reasonableness is assumed for matters of a legal nature, whether existing or pending.

Information identified as being furnished or prepared by others is believed to be reliable but no responsibility for its accuracy is assumed.

The Appraiser, by reason of this appraisal, shall not be required to give testimony as an expert witness in any legal hearing or before any court of law unless justly and fairly compensated for such service.

By reason of the Purpose of the Appraisal or Function of the Report herein set forth, the value reported is only applicable to the Property Rights Appraised and the Appraisal Report should not be used for any other purpose.

Disclosure of the contents of this report is governed by the by-laws and Regulations of the Appraisal Institute.

Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraiser. The appraiser has no knowledge of the existence of such materials on or in the property. The appraiser, however, is not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam insulation or other potentially hazardous materials may affect the value of the property. Any value estimate is predicated on the assumption that there is no such material on or in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, if desired.

In arriving at the value set forth in this appraisal no consideration has been given to the effect of state, local or federal income and gains taxes or of occupancy, hotel, capital levy, gift, estate, succession, inheritance or similar taxes which may be imposed upon any owner, lessee, or mortgagee by reason of any sale, conveyance, transfer, leasing, hypothecation, mortgage, pledge or other disposition of the appraised property.


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page v

TABLE OF CONTENTS


Title		Page
Letter of Transmittal
Certificate of Value		i
Basic Assumptions and Limiting Conditions	ii
Subject Photograph	iv
Table of Contents		v

Executive Summary		6
Introduction and Premises of the Appraisal		7
Regional Overview		8
Neighborhood Overview		12
Site Analysis		13
Real Estate Taxes		15
Zoning		16
Description of Improvements		16
Apartment Market Overview		18
Economic Rent Analysis		20
Highest and Best Use		27

Valuation Procedure		28
Income Capitalization Approach		29
Sales Comparison Approach		34
Reconciliation and Final Value Conclusion		36

ADDENDA
Subject Photographs
Comparable Rental Photographs
Comparable Sale Photographs
Regional Location Map
Neighborhood Map
Comparable Rentals Map
Comparable Sales Map
Qualifications


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 6

EXECUTIVE SUMMARY


Property:		Crosswood Park Apartments

Location:		6801 San Tomas Drive, Citrus Heights, California

Assessors Parcel ID No:		Sacramento County Parcel #229-0100-011-0000

Purpose of Appraisal:		To estimate the Market Value of the subject property as of the date of value.

Date of Value:		November 30, 2006

Date of Report:		December 8, 2006

Interest Appraised:		Fee Simple Estate

Description of Property:		The subject property consists of a 10.6-acre tract of land improved with a 180-unit garden-style apartment complex known as the Crosswood Park Apartments. Construction of the improvements was reportedly completed in 1976. The complex contains 194,982 rentable square feet, which suggests an average unit size of 1,083 square feet.

Location:		The subject property is in the western portion of Citrus Heights, immediately south of Auburn Blvd. and 0.75 miles west of Sylvan Rd.

Zoning:		The subject site is zoned RD-20 by the City of Citrus Heights. The intended use of land in this zoning district is high-density multifamily residential development at a density not to exceed 20 units per acre.

Flood Zone:		According to the Federal Emergency Management Agency (FEMA), the property is within Zone X, an area outside any special flood hazard areas as defined by FEMA. FEMA Map No. 0602620085E, dated 07/16/1998.

Highest and Best Use:		Multifamily residential development.

Marketing Period:		Less than 12 months

Valuation Assumptions:

Average Market Rent (per Unit per Month)		$1,030
Market Vacancy/Credit Loss		7.5%
Operating Expense Ratio		53.8% of EGI
Net Operating Income		$945,425
Overall Capitalization Rate		6.1%

Final Estimate of Market Value, by Approach
Cost Approach:		N/A
Income Approach:		$15,750,000
Sales Comparison Approach:		$15,750,000
Final Estimate of Market Value:		$15,750,000


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 7

INTRODUCTION AND PREMISES OF THE APPRAISAL


Scope of the Assignment:		According to the Appraisal Institute’s Code of Professional Ethics and Uniform Standards of Professional Appraisal Practice, the scope of the appraisal is cited as “the extent of the process of collecting, confirming, and reporting data” included in an appraisal report. The scope of this appraisal employs all applicable appraisal techniques and constitutes a Complete Appraisal as defined by USPAP. The presentation of data, analyses and conclusions are presented in summary report format.

		The data included in this report has been researched from the subject property’s influencing market. County and City officials were interviewed regarding taxes, zoning requirements, flood zone information, demographic data, planned construction, recently completed developments, and other economic impacting events. Market participants, including real estate brokers and property managers, were consulted regarding market parameters and activity. Lenders as well as investor surveys were consulted regarding investment parameters. The Sales Comparison and Income Capitalization Approaches to value have been performed in estimating the Market Value of the subject. Sales utilized were confirmed with a principal or representative involved with the sale. Leasing agents for the competitive complexes were interviewed regarding property specific information. Supply and demand factors affecting the local market have been analyzed.

Purpose and Use of Appraisal:		The purpose of the appraisal is to estimate the Market Value of the Fee Simple Estate of the subject property as of November 30, 2006. It is for the internal use of AIMCO to facilitate asset evaluation, and to be utilized in conjunction with a planned transaction with the limited partners.

Property Rights Appraised:		The property interest appraised is that of the Fee Simple Estate. A Fee Simple Estate is defined by The Dictionary of Real Estate Appraisal, Second Edition AIREA, as:

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

Marketing Period:		The value conclusion reported herein assumes a marketing period of less than one year. According to the Korpacz Real Estate Investor Survey, 3^rd Quarter 2006, indicates that apartment properties in the national market have an average marketing time of 5.58 months, lower than the average of 5.92 months reported one year ago. This estimate seems reasonable, given recent market activity in the influencing area and the profile of the subject property.

Property History:		Property tax records of the Sacramento County Assessor indicate that VMS National Property JV is the current owner of record. To our knowledge there are no contracts of sale pending as of the date this report was prepared, nor are we aware that the property is listed for sale.


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 8


Most Likely Buyer:		National and regional investors typically purchase multifamily properties of this size in markets such as the subject.

Definition of Market Value:		Market Value, as approved and adopted by the Appraisal Foundation in the Uniform Standards of Professional Appraisal Practice is as follows:

		“The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

		Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby:

		1. buyer and seller are typically motivated;

		2. both parties are well-informed or well advised, and acting in what they consider their best interests;

		3. a reasonable time is allowed for exposure in the open market;

		4. payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and

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


REGIONAL OVERVIEW

		The subject property is within the city limits of Citrus Heights, Sacramento County, California, which is part of the 4-county Sacramento-Arden-Arcade-Roseville, CA Metropolitan Statistical Area (MSA). The subject site is approximately 12 miles northeast of downtown Sacramento and less than 5 miles northeast of McClellan Air Force Base. Citrus Heights is a close-in bedroom suburb of Sacramento.

Overview:		The Sacramento CMSA is in the north central part of the state and is the 25th largest metropolitan area in the United States with approximately 2.1 million people as of July 1, 2005. Sacramento County contains approximately 75% of the metropolitan population. The other 3 counties include El Dorado, Placer and Yolo. The Lake Tahoe region is in El Dorado and Placer Counties, approximately 75 miles northeast of Sacramento. Yolo County is adjacent to Solana and Napa Counties, which are part of the San Francisco CMSA. Downtown San Francisco is approximately 75 miles southwest of Sacramento via I-80. Reno, NV is approximately 120 miles northeast via I-80. Sacramento is the state capital.

		Historical population growth patterns are expanding suburban rings around the Sacramento urban core. Some of the current suburban communities began as


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 9


		small towns that eventually merged into the metropolitan urbanized area, which now extends beyond 25 miles from the central districts. The urban areas in the Lake Tahoe communities, which are included in the CMSA because of their location in El Dorado and Placer Counties, are separated from Sacramento by national forests and mountain ranges. Most of the growth in Sacramento has been to the northeast (toward Roseville and Rocklin in Placer County northeast of the subject) and to the south toward the city of Elk Grove.

Population:		During the period between 1990 and 2000, the CMSA’s population grew at an average annual compound rate slightly above the state and national averages. Regional population growth during the 1990s was very strong as in-migration occurred from the very high cost areas of San Francisco and San Jose. In addition, state government grew and the regional economy expanded. This growth is expected to slow due to a decreasing availability of large developable suburban parcels. The area surrounding the subject is expected to grow slightly faster as denser infill development continues.

POPULATION TRENDS


					Avg Annual							Avg Annual
	Census		Census		% Change			Estimated		Projected		% Change
Region	1990		2000		1990-2000			2005		2010		2005-10

1-mile Radius		16,187		16,965		0.48	%		18,704		20,531		0.98	%
5-mile Radius		312,355		354,029		1.33	%		398,689		443,872		1.13	%
Sacramento CMSA		1,481,122		1,796,857		1.95	%		2,078,408		2,347,528		1.29	%

Source: DemographicsNow


		According to the US Census, the CMSA is the 25th largest in the country in terms of people, between Kansas City, MO-KS and Cincinnati-Hamilton, OH-KY-IN, and it ranked 23rd in terms of the number of additional people added during the 1990-to-2000 period, between Philadelphia-Wilmington-Atlantic City, PA-NJ-DE-MD and San Diego, CA. However, it ranked only 56th in terms of percentage change during the same period, with an 21.3% increase (between Albuquerque, NM and Jacksonville, FL) – reflecting the average slower growth typically experienced within larger urbanized areas.

Households:		Household formation increased consistent with the population growth. Future increases in the near term are expected to be similar to the overall population trends. Most of the population growth in the suburban ring is anticipated to be associated with growing families. The subject area is expected to continue to mature with aging households and not a lot of new families.

HOUSEHOLD TRENDS


					Avg Annual							Avg Annual
	Census		Census		% Change			Estimated		Projected		% Change
Region	1990		2000		1990-2000			2005		2010		2005-10

1-mile Radius		6,467		7,105		0.99	%		7,495		7,948		0.60	%
5-mile Radius		117,324		133,586		1.39	%		145,373		157,712		0.85	%
Sacramento CMSA		556,454		665,298		1.96	%		750,153		831,710		1.09	%

Source: DemographicsNow


Income:		The subject’s immediate area has a median household income slightly lower than the region. This is expected to continue in the future.


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 10

COMPARATIVE INCOME LEVELS


	Per Capita Income	Median Household Income	Average Household Income

1-mile Radius	$23,245	$46,535	$55,487
5-mile Radius	$24,491	$51,106	$65,655
Sacramento CMSA	$25,297	$51,451	$68,453

Source: DemographicsNow


Economic Conditions:		According to the Federal Reserve November 29, 2006 Beige Book, economic activity in the San Francisco Twelfth District expanded at a moderate pace during the survey period of October through mid-November. Wage growth continued overall. Selected worker groups with specialized skills in some industries experienced strong growth. Retail sales rose and demand for services was strong. Output and sales grew in most manufacturing sectors and for producers of agricultural products. Residential construction, sales activity, and price appreciation continued to slow in most areas, while the demand for commercial real estate grew further. District banks reported strong loan demand and good credit quality.

		The CMSA has a Gross Metropolitan Product that ranks 24th in the nation per the most recent March 2006 report on the role of metro economies in the U.S published by the U.S. Conference of Mayors – between that of San Jose-Sunnyvale-Santa Clara, CA and Cleveland-Elyria-Mentor, OH. This was a substantial improvement from the 34^th place ranking in 2001. The metro economy was also the 24^th fastest growing metro, with an increase of 7.1% in 2004. The metro economy represents 5.5% of the state total.

Employment:		The following table shows the region in terms of industry sector and occupation. No major changes in occupation mix are expected in the near term. According to Sacramento Regional Research Institute, a Joint Venture of SACTO and California State University, Sacramento, in the most recent May 2006 Economy Watch, the Sacramento Region’s Professional & Business Services; Leisure & Hospitality; and Trade, Transportation, & Utilities sectors posted the greatest job gains over the past 12 months. Combined, these three sectors added 16,400 jobs and accounted for about 65 percent of the Region’s net job gain. While Manufacturing continues to see job losses at the statewide level, this sector has maintained positive job growth in the Sacramento Region. Three of the Region’s sectors lost jobs between April 2005 and 2006 including Natural Resources & Mining; Other Services; and Information.


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 11

EMPLOYMENT BY INDUSTRIAL SECTOR


	Sacramento-Yolo CMSA

Total Employed 2003		849,242

By Industry
Agriculture/Mining		1.0	%
Construction		8.4	%
Manufacturing		6.6	%
Wholesale Trade		3.2	%
Retail Trade		11.6	%
Transportation/Utilities		4.4	%
Information		3.6	%
Finance/Insurance/Real Estate		8.1	%
Services		43.3	%
Public Administration		9.7	%


By Occupation	Sacramento-Yolo CMSA

White Collar		67.2	%
Management/Business/Financial		15.9	%
Professional		22.1	%
Sales		11.7	%
Administrative Support		17.5	%
Services		14.5	%
Blue Collar		18.3	%
Farming/Forestry/Fishing		0.3	%
Construction/Extraction		5.7	%
Installation/Maintenance/Repair		3.4	%
Production		3.9	%
Transportation/Material Moving		5.0	%

Source: DemographicsNow


		According to Sacramento Regional Research Institute, a Joint Venture of SACTO and California State University, Sacramento, in the most recent May 2006 Economy Watch, over the past 2 months, the 6-county Sacramento Region has seen slight declines in its year-over-year employment growth rates. From the recent peak in February 2006, job growth has fallen to 2.8%, reflecting an increase of 25,200 jobs between April 2005 and 2006. Despite the current decline, job growth in April 2006 was still higher than growth rates seen in a number of years and was well above the statewide and national averages.

		The area’s current largest private sector employers are shown in the following table. The State of California also employs a large number of people in services and education.

SACRAMENTO MSA — LARGEST NON-GOVERNMENT EMPLOYERS


Company	Industry	Number of Local Employees

Kaiser Permanente	Healthcare		7,283
Raley’s Inc.	Retail Groceries		7,134
Intel Corp.	Semiconductors and Related Devices		6,500
UC Davis Health System	Healthcare		6,449
CHW/Mercy Healthcare Sacramento	Healthcare		6,303
Sutter Medical Center	Healthcare		6,227
SBC	Telecommunications		5,010
Hewlett-Packard Co.	Computer Hardware Manufacturer		4,000
Target Corp.	Retail		3,212
The Home Depot*	Retail		3,200

Source: Sacramento Regional Research Institute, 2006. www.sactoedc.org


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 12


Unemployment:		According to the Bureau of Labor Statistics, the unemployment rate in the Sacramento MSA (3-county metro area) was 3.9% in October 2006, down from a revised 4.4% in October 2005. This compares with an unemployment rate of 4.2% for California and 4.1% for the nation during the same period.

Transportation And Infrastructure:		Transportation throughout the region is largely dependent on the private automobile, which is supplemented by local and county bus services. As such, the region has developed into a series of multiple nodes with good proximity to the regional highway system. Interstate 80 provides the primary east-west access between San Francisco and Reno. North-south access is provided by I-5 to Los Angeles and Portland. California Route 99 (Golden State Highway) parallels I-5 from downtown Sacramento and connects the region to the southern Central Valley cities of Fresno and Bakersfield. Sacramento is also served by an air cargo airport, an international airport, a deep-water shipping port, 2 major Interstate freeways, freight and passenger rail lines, and a regional commuter bus and light-rail system.

Conclusions:		The region’s diversity and strength have helped it maintain a growth rate near or above the national average. Over the next few years, growth is anticipated to be slower than recently experienced as the region continues to mature. The subject property, however, is in a suburban area that is expected to maintain slightly higher than average growth rates as infill development becomes denser over time.

NEIGHBORHOOD OVERVIEW

Location:		The subject property is in the western section of Citrus Heights, immediately south of Auburn Blvd, approximately 0.75 miles west of Sylvan Rd. Situated in close proximity to Interstate 80, a major east/west freeway in Sacramento County, the subject property is accessible to neighborhood services and employment centers. The location of the subject property is rated as good.

Access:		Primary roadways in the neighborhood include the east/west traffic arteries of Auburn Blvd and Greenback Lane and the north/south traffic arteries of Van Maren Lane, Sylvan Blvd and Sunrise Blvd. Crosswood Park provides easy access to Interstate 80, approximately 1.25 miles to the north, which provides access to downtown Sacramento and most major employment/retail centers in Sacramento and Placer Counties.

		The subject neighborhood has excellent access to neighborhood support services and employment centers. Numerous business parks are within a short commute of the subject neighborhood. Sunrise Mall (a major regional shopping center containing Macy’s) is approximately 1.5 miles east of the subject site. Sunrise Blvd. (approximately 1.5 miles east of Crosswood Park) is the major retail destination for eastern Sacramento County. The subject is approximately 0.25 miles from a Costco on Auburn Blvd. In addition, a Wal-Mart Superstore is being constructed adjacent to the Costco on Auburn Blvd. Sacramento County’s regional bus system operates a route on Auburn Blvd. immediately adjacent to the subject. Citrus Heights maintains a public park


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 13


		immediately south of Crosswood Park. Public services, including schools and medical facilities, are in close proximity.

Land Use:		The subject neighborhood is a relatively new and maturing residential district. The area realized much of its growth from the 1970s through the early 1990s. Most of the apartments in the area were built in the 1980s and 1990s. As the growth pattern of the Sacramento area continues northeast along Interstate 80, much of the land in the subject neighborhood has been developed. Approximately 85% of the land area is developed with limited land available to accommodate additional development. Multifamily and commercial development is prevalent along the primary roadways. Public green belts, parks and athletic fields are near the subject site. The predominate land use in the neighborhood is residential, consisting of both single-family and multifamily developments.

Adjacent Land Uses:		South: Multifamily and public park
		North: Single-family homes
		East: Multifamily
		West: Multifamily

New Construction:		Due to the limited availability of vacant land suitable for development, only limited new construction was noted in the immediate vicinity of the subject property. Most new structures being completed in the immediate vicinity are retail or commercial in nature. No new single-family or multifamily construction was noted during the site inspection. This benefits the subject property, as there does not appear to be any new multifamily supply in the immediate neighborhood.

Change in Current Use		The neighborhood can be classified as being in the mature stage of its life cycle with continued growth as infill. As a result of its good location with access to Sacramento and Placer Counties, growth in the area is anticipated to continue in the form of new development on vacant and underutilized sites.

Conclusion		The property is in the northeastern growth pattern of the Sacramento region, within the city of Citrus Heights. The area is easily accessible from all parts of Sacramento and Placer counties due to its proximity to Interstate 80. As a result of its good location, the area has proven to be a desirable residential and commercial location. Major employers are in close proximity to the subject neighborhood along Greenback Lane and Sunrise Blvd. The presence of major employers in the area has enhanced the desirability of the neighborhood as a residential location. Area residents are offered a broad range of services and excellent access to other parts of the Sacramento area.

SITE ANALYSIS

Location		The site is in western portion of Citrus Heights, along the south side of Auburn Blvd., approximately 0.75 miles west of Sylvan Rd.

Size		The site is irregular in shape and has of a total land area of 10.6 acres.


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 14


Excess Land		None

Topography		Generally level and on grade with the bounding street

Site Improvements		The 10.6-acre site is improved with a 180-unit garden-style apartment community known as the Crosswood Park Apartments. See Description of the Improvements section of this report for details concerning site improvements.

Street Improvements		Crosswood Parkway and San Tomas Drive provide direct access to the subject. Both Crosswood Parkway and San Tomas Drive intersect with Auburn Blvd., a major east-west thoroughfare.

Desirability of Location		Good

Access to Major Arteries		Good

Access to Local Arteries		Good

Curb Appeal		Good

Ingress/Egress		Good – Adequate road frontage along a major east-west thoroughfare.

Visibility from Road		Good

Public Transportation		Average

Neighborhood Appearance		Good

Flood Zone Map		According to the Federal Emergency Management Agency, the property is within Zone X, outside any special Flood Hazard Areas (FEMA Map No. 0602620085E, Dated 07/16/1998).

Easements		The appraisers were not provided with a site survey or title documents that provide information on the existence of easements and encroachments. Other than typical utility easements, visual observation of the site did not reveal the existence of adverse easements or encroachments, however in the absence of a site survey and title documents, the appraiser makes no representation as to the presence of adverse easements or encroachments.

Soil Conditions		Visual observation does not indicate any surface or subsurface soil conditions that are unusual for the area. Based on our inspection, it appears that the soil is of adequate load bearing capacity to support the subject improvements. No major foundation cracks were visible upon inspection of the subject improvements that would indicate the subsoil conditions are not stable. No nuisances or hazards were noted.

Land Use Restrictions		The appraisers are unaware of any deed restrictions that would adversely affect the utility of the subject site; however, this is not a guarantee that such restrictions may exist. Therefore, it is recommended that a current title policy


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 15


		be obtained for the subject property, which would disclose any land use restrictions that may exist.

Utilities		All municipal utilities (water and sewer) and private services (electric, gas, telephone) are available to the site.

Police and Fire Protection		Provided to the site by the city of Citrus Heights

Conclusion		The subject represents a desirable site for multifamily development.

REAL ESTATE TAXES

Assessor’s Parcel No:		229-0100-011-0000 (Sacramento County Assessor Parcel Number)
Ad Valorem Tax Rate (2005)		1.06647% of Net Assessed Value
Payment Due Date		Taxes are paid annually in arrears.
2006 Net Assessed Value		$12,888,875

Tax Analysis		The subject property is under the taxing jurisdiction of Sacramento County. The Proposition 13 Amendment to the California State Constitution limits the maximum annual tax on real property.

		The general tax levy for all agencies cannot exceed 1.0% of the property’s assessed value, except for additional taxes for bonded indebtedness. In addition, agencies may levy direct assessment taxes to pay for services such as lighting maintenance, weed abatement, etc. The average tax rate across the state is approximately 1.25%.

		Real property is reappraised only when a change in ownership occurs, new construction is completed, new construction is partially completed on the lien date (January 1), or a decline in market value occurs (Proposition 8). Except for these instances, real property assessments cannot be increased by more than 2.0% annually, regardless of the rate of inflation.

		Properties with a Proposition 8 assessment must be reviewed by the Assessor each year on January 1, to verify whether the conditions that resulted in a decline in value still exist. Based on market conditions the value may change annually, not to exceed the original Proposition 13 trended base value.

Projected Taxes		The stabilized pro-forma tax liability is based on the hypothetical sale of the subject property at the current appraised value and the application of the current effective tax rate. The hypothetical value is derived in the sales comparison approach. See the income capitalization approach section for additional comments on the amount.

ZONING

Zoning:		The site is zoned RD-20 by the City of Citrus Heights.


Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Page 16


Permitted Use		The RD-20 zoning designation is intended to accommodate condominiums, townhouses, duplexes and apartments at a density of 20 units per acre. Commercial or retail uses are not permitted.

Maximum Height:		2 stories

Maximum Density:		20 units per acre, or a total of 212 units.

Parking Requirements		Parking requirements depend on use and are subject to site plan review.

Comments:		It appears as though the existing improvements represent an allowed and conforming use of the site with regard to zoning.

DESCRIPTION OF IMPROVEMENTS

The subject improvements consist of a 180-unit garden-style apartment complex known as the Crosswood Park Apartments. The following offers a description of the improvements.

KTR Site Inspector:		John Grochowiak
Date of Inspection:		November 30, 2006
Property Contact:		Katherine Irish — On-site Manager
Year Built:		1976
Number Units:		180
Configuration/Stories:		Garden-style complex, 2 -story residential structures
Net Rentable Area:		194,982 square feet

EXTERIOR
Foundations:		Reinforced concrete slabs, on grade
Frame:		Wood frame
Exterior Walls:		Wood trim covered in stucco
Roof:		Composition shingle
Doors and Windows:		Exterior entrance doors are hollow core metal. Interior doors are hollow core wood. The windows are single-pane glass set in aluminum frames.
HVAC:		Ground mounted electric AC condensing units, electric heat
Plumbing:		Kitchens contain sink and dishwasher. Bathrooms contain porcelain toilet and sink and fiberglass bathtub/shower combinations. Hot water is provided by individual heaters in each unit.
Electrical:		Property is sub-metered for electric; electricity is paid by the tenant.
Parking and Walkways:		The parking areas and internal roadways are asphalt paved. The streets and parking areas have concrete curbs. Walkways are concrete paved. There is adequate on-site parking provided, some of which is covered.

INTERIOR
Walls and Ceilings:		Walls are painted sheetrock, and the gypsum ceilings are covered with a sprayed-on textured surface.
Floors:		Interior floors are carpet over hardwood in living areas and bedrooms with sheet vinyl or ceramic tile in the kitchens and bathrooms.
Kitchen Equipment:		Built-in wood cabinets with laminate counter tops and stainless steel sink. Appliances include a combination range/oven, microwave, disposal, dishwasher and refrigerator/freezer.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 17


PROJECT AMENITIES
Security:		No
Swimming Pool:		Yes
Fitness Center:		Yes
Clubroom:		Yes
Tennis Court:		Yes
On-site Management Office:		Yes
Laundry Room:		No
Microwave:		Yes
Compactor:		No
Fireplace:		Yes
Balconies/Patios		Yes
Cable TV:		Yes
In-Unit Washer/Dryers		Yes
Perimeter Fencing:		Yes
Access Controlled Entry:		No
Other:		Covered parking, indoor sauna, basketball court, and man-made creek

The following chart illustrates the property’s unit breakdown and size.

CROSSWOOD PARK APARTMENTS – UNIT MIX


		No. of
Name	Unit Type	Units		Size (SF)		Total (SF)

Shasta	1BR/1BA		66		802		52,932
Sequoia	2BR/1BA		12		950		11,400
Sierra	2BR/1.5BA Townhouse		81		1,250		101,250
Yosemite	3BR/2BA Townhouse		21		1,400		29,400

	Totals/Average		180		1,088		194,982

CONDITION/MAINTENANCE


Overall Condition: Landscaping: Parking: Sidewalks/Curbs: Walls/Fences: Refuse Area: Basement: Health Club: Club Room: Exterior Walls: Roofs: Stairs: Lobby/Hallways: Entry Doors: Patios/Balconies: Elevators:		Average Average Average Average Average Average N/A Average Average Average Average Average N/A Average Average Average


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 18


Apartment Interiors:
	Overall:	Average
	Kitchen Equipment:	Average
	Mechanical Equipment:	Average
	Bathroom:	Average
	Walls/Ceilings:	Average
	Layout:	Average
	Light and View Quality:	Average

Cosmetic Repairs:		Our physical inspection revealed that the subject property is in average condition.
Deferred Maintenance:		No elements of deferred maintenance were noted during the appraiser’s inspection of the property and on-site management reported none.
Comparability:		Similar to competing properties of the same vintage.
Observed Effective Age:		30 years (similar to the actual age of the improvements)
Economic Life:		50 years (per Marshall Valuation Service Manual)
Remaining Economic Life:		20 years
General Comments:		Based on our inspection, the subject property is considered to be of average quality construction and to be in average condition overall. It competes effectively with other properties of the same vintage.

APARTMENT MARKET OVERVIEW


Supply:		The following table shows historical inventory and construction trends, current estimates and short-term projections by REIS as of the 3^rd Quarter 2006 for the Citrus Heights submarket. The total number of rental units has remained stable for the period from 2001 to 2004 while declining slightly in 2005. It is projected that the number of units will not increase over the 4-year period from 2006 to 2010. This is shown in the following table. Essentially no new product is being added to the Citrus Heights submarket. This obviously benefits the subject property since additions to supply are non-existent.

SUBMARKET INVENTORY


		Unit		Unit		Annual
	Year	Inventory		Completions		% Change

Historical	2001		6,677		0		0.0	%
Historical	2002		6,677		0		0.0	%
Historical	2003		6,677		0		0.0	%
Historical	2004		6,677		0		0.0	%
Historical	2005		6,677		0		-0.3	%
Current	3Q 2006		6,655		0		0.0	%
Estimated	2006		6,655		0		0.0	%
Projection	2007		6,655		0		0.0	%
Projection	2008		6,655		0		0.0	%
Projection	2009		6,655		0		0.0	%
Projection	2010		6,655		0		0.0	%



Source: REIS MetroTrend Futures 3Q 2006 Citrus Height Submarket, licensed to KTR


Vacancy:		Vacancy rates increased from 3.4% to 7.0% from 2001 to 2003 and then declined to 5.9% by end of 2005. The rate has increased slightly during 2006, and is 6.5% as of 3^rd Quarter. However, approximately a third of the


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 19


		surveyed properties have vacancy rates under 3.2%, and the median is 4.9%. The subject has a current vacancy rate of 2%, which is superior to the submarket average but consistent with the median performance levels. The average vacancy rate is expected to continue to fall over the next several years due to continue population growth and a declining number of readily developable sites.

SUBMARKET VACANCY TRENDS


		Vacancy
	Year	Rate

Historical	2001		3.4	%
Historical	2002		5.2	%
Historical	2003		7.0	%
Historical	2004		6.6	%
Historical	2005		5.9	%
Current	3Q 2006		6.5	%
Estimated	2007		5.8	%
Projection	2008		5.4	%
Projection	2009		4.7	%
Projection	2010		4.5	%



Source: REIS MetroTrend Futures 3Q 2006 Citrus Height Submarket, licensed to KTR


Rental Rates:		Concurrent with decreased vacancies, market asking rents have generally increased in every year since 2001 for the Citrus Heights submarket. Effective rents also show an upward increasing trajectory in the period from 2001 to 2006. Furthermore, effective rents are projected to continue to increase in the period from 2007 to 2010. Concessions reached a peak in 2004 and have since declined. Concessions are further projected to decline in the period from 2007 to 2010.

SUBMARKET RENTAL RATE TRENDS


				Asking Rent					Eff Rent
		Asking		Annual			Effective		Annual			Rent
	Year	Rent		% Change			Rent		% Change			Discount

Historical	2001	$	789		9.4	%	$	782		9.5	%		.90	%
Historical	2002	$	804		1.9	%	$	785		0.4	%		1.1	%
Historical	2003	$	811		0.9	%	$	774		-1.4	%		4.6	%
Historical	2004	$	822		1.4	%	$	776		0.3	%		5.6	%
Historical	2005	$	827		0.6	%	$	783		0.9	%		5.3	%
Current	3Q 2006	$	842		2.3	%	$	797		0.2	%		5.3	%
Estimated	2007	$	868		2.5	%	$	825		3.3	%		5.0	%
Projection	2008	$	895		3.1	%	$	854		3.5	%		4.6	%
Projection	2009	$	926		3.6	%	$	887		3.9	%		4.2	%
Projection	2010	$	963		4.1	%	$	926		4.4	%		3.8	%



Source: REIS MetroTrend Futures 3Q 2006 Citrus Height Submarket, licensed to KTR


Market Segmentation:		The following table shows the segmentation by property age. The highest vacancies are seen in the 1970-1979 segment. The lowest vacancies are seen in the 1990-1994 segment. The subject property was constructed in 1976 that places it in the 1970-1979 segment. However, the subject property’s vacancy rate of 2% compares favorably with the submarket median of 4.9%.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 20

SUBMARKET MARKET SEGMENTATION


	% by			Project		Unit		Vacancy			Asking
Year Built	Age			Inventory		Inventory		Rate			Rent

Before 1970		N/A			0		N/A		N/A			N/A
1970-1979		17	%		8		1,131		10.0	%	$	803
1980-1989		74	%		34		4,925		6.2	%	$	846
1990-1994		10	%		4		599		2.6	%	$	894
After 1994		0	%		0		N/A		N/A			N/A
Avg/Total		100	%		46		6,655		6.0	%	$	842



Source: REIS MetroTrend Futures 3Q 2006 Citrus Height Submarket, licensed to KTR


Conclusions:		The market is expected to remain quite strong with no increase in inventory, strong demand, low vacancy rates, high asking rents, high effective rents and relatively low levels of concessions. These favorable submarket dynamics should continue to benefit the subject property.

ECONOMIC RENT ANALYSIS

Five competitive properties follow. They are in the influencing area of the subject property and define the range of property type and rents available. The information regarding the rent comparables was obtained through physical inspections and interviews of rental agents and property managers. The rents commanded by competitive properties in the influencing area are utilized to determine the economic rent potential for the subject property.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 21

Rent Comparable #1


Address:		Salishan
		7541 Ramona Lane
		Citrus Heights, CA

Number of Units:		304

Year Built:		1980’s

Description:		Gated garden-style apartments comprised of 2-story residential buildings with wood frame walls covered in stucco surrounded by asphalt parking areas.

Amenities:		Apartment features include washer/dryer in every unit, wood burning fireplaces, balconies or patios and electric kitchen appliances including frost-free freezer and microwave oven. Property features include pool (2), basketball court, fitness center, racquetball court and on-site management.

RENTAL DATA


Unit Type	Size (SF)	Asking Rent/Unit	Effective Rent/Unit	Effective Rent/SF

1BR/1BA	672 to 755	$825 to $885	$783 to $843	$1.12 to $1.17
2BR/1BA	956	$970	$928	$0.97
2BR/2BA	1,002	$1,040	$1,040	$1.04


Occupancy:		88%

Concessions:		$500 off for a 12-month lease on 1BR/1BA and 2BR/1 BA units. Rents are reduced as presented in the chart above.

Comments:		This property has a similar location and a similar condition as in comparison to the subject. However, this property is gated; subject is not.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 22


Rent Comparable #2

Address:		The Grove at Sunrise
		5400 Heritage Tree Lane
		Citrus Heights, CA

Number of Units:		206

Year Built:		2000

Description:		Gated garden-style apartments comprised of two-story residential buildings with wood frame walls covered in stucco surrounded by asphalt parking areas.

Amenities:		Apartment features include washer/dryer in every unit, wood burning fireplaces, balconies or patios and electric kitchen appliances including dishwasher and garbage disposal. Property features include pool (2), spa, storage units, fitness center, clubhouse and on-site management.

RENTAL DATA


Unit Type	Size (SF)	Asking Rent/Unit	Effective Rent/Unit	Effective Rent/SF

1BR/1BA	800	$ 965	$ 965	$1.21
2BR/2BA	965	$1,120	$1,120	$1.16
3BR/3BA	1,203	$1,300	$1,300	$1.08


Occupancy:		96%

Concessions:		None currently offered by management.

Comments:		This property has a superior location and a superior condition as in comparison to the subject. In addition this property is gated; subject is not.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 23


Rent Comparable #3

Address:		Oak Creek Village
		7747 Greenback Lane
		Citrus Heights, CA

Number of Units:		88

Year Built:		1990

Description:		Gated garden-style apartments comprised of two-story residential buildings with wood frame walls covered in stucco surrounded by asphalt parking areas.

Amenities:		Apartment features include washer/dryer in every unit, wood burning fireplaces, balconies or patios and electric kitchen appliances including dishwasher and microwave oven. Property features include pool, spa, fitness center, clubhouse and on-site management.

RENTAL DATA


Unit Type	Size (SF)	Asking Rent/Unit	Effective Rent/Unit	Effective Rent/SF

1BR/1BA	750	$803	$803	$1.07
2BR/1BA	938	$920	$920	$0.98
2BR/2BA	1,000	$970	$970	$0.97


Occupancy:		99%

Concessions:		None currently offered by management.

Comments:		This property has a similar location and a similar condition as in comparison to the subject. However, this property is gated; subject is not.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 24


Rent Comparable #4

Address:		The Renaissance
		7711 Greenback Lane
		Citrus Heights, CA

Number of Units:		300

Year Built:		1990

Description:		Gated garden-style apartments comprised of two-story residential buildings with wood frame walls covered in stucco surrounded by asphalt parking areas.

Amenities:		Apartment features include wood burning fireplaces, balconies or patios and electric kitchen appliances including dishwasher and garbage disposal. Property features include laundry rooms, pool, tennis court, clubhouse and on-site management.

RENTAL DATA


Unit Type	Size (SF)	Asking Rent/Unit	Effective Rent/Unit	Effective Rent/SF

1BR/1BA	609	$ 700	$ 700	$1.15
2BR/1BA	760	$ 835	$ 835	$1.10
2BR/1.5BA	840	$ 860	$ 860	$1.02
3BR/2BA	1,295	$1,212	$1,212	$0.94


Occupancy:		95%

Concessions:		None currently offered by management.

Comments:		This property has a similar location and a similar condition as in comparison to the subject. However, this property is gated; subject is not. This property does not have full size washer/dryers in each unit; subject does.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 25


Rent Comparable #5

Address:		Autumn Ridge
		6011 Shadow Lane
		Citrus Heights, CA

Number of Units:		410

Year Built:		1990

Description:		Gated garden-style apartments comprised of two-story residential buildings with wood frame walls covered in stucco surrounded by asphalt parking areas.

Amenities:		Apartment features include washer/dryers in each unit, wood burning fireplaces, balconies or patios and electric kitchen appliances including dishwasher. Property features include three pools, tennis courts, saunas, two racquetball courts, fitness center, clubhouse and on-site management.

RENTAL DATA


Unit Type	Size (SF)	Asking Rent/Unit	Effective Rent/Unit	Effective Rent/SF

1BR/1BA	639	$ 825	$756	$1.18
2BR/1BA	821	$ 930	$853	$1.04
2BR/2BA	920	$1,010	$926	$1.01


Occupancy:		96%

Concessions:		One month off for a 12-month lease. Rents are reduced as presented in the chart above.

Comments:		This property has a similar location in comparison to the subject. However, this property has a superior condition and a superior amenity package in comparison to the subject. In addition, this property is gated; subject is not.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 26

ANALYSIS

The subject property has a good Citrus Heights location along Auburn Blvd., approximately 1.25 miles south of Interstate 80. It is competitive with other properties in terms of location, condition, amenities, and unit size. The tables below illustrate the comparables in comparison to the subject property.

The subject is relatively similar to Salishan and Oak Creek Village in terms of location and physical attributes. The subject is inferior to The Grove at Sunrise and Autumn Ridge in terms of location, age, physical attributes and overall amenities. The subject is most similar to The Renaissance in terms of location, condition and overall amenities. In general, the subject’s rental rates should be aligned below the rents indicated by The Grove at Sunrise and Autumn Ridge, and most similar to rents indicated by The Renaissance.

ONE-BEDROOM FLOOR PLANS


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

Subject	1BR/1BA	802	$840	$1.05	Subject
Salishan	1BR/1BA	672 to 755	$747 to $775	$1.12 to $1.17	Similar
Grove at Sunrise	1BR/1BA	800	$885	$1.21	Superior
Oak Creek Village	1BR/1BA	750	$790	$1.07	Similar
The Renaissance	1BR/1BA	609	$646	$1.15	Similar
Autumn Ridge	1BR/1BA	639	$732	$1.18	Superior



Source: KTR November 2006 Field Survey

As indicated above, the rent (on a per square foot basis) for the subject’s 1-bedroom floor plans are within a tolerable variance of the range of rents illustrated by Salishan, Oak Creek Village and The Renaissance. Since the subject is older than its most similar comparables, it is not surprising that its rent levels for 1-bedroom units should be slightly lower on a per square foot basis. In addition, Salishan, Oak Creek Village and The Renaissance are gated; the subject is not.

TWO-BEDROOM ONE-BATH FLOOR PLANS


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

Subject	2BR/1BA	950	$974	$1.03	Subject
Salishan	2BR/1BA	956	$928	$0.97	Similar
Oak Creek Village	2BR/1BA	938	$920	$0.98	Similar
The Renaissance	2BR/1BA	760	$835	$1.10	Similar
Autumn Ridge	2BR/1BA	821	$853	$1.04	Superior



Source: KTR November 2006 Field Survey

The effective rents for the subject’s 2-bedroom/1-bath units are $1.03 psf. As indicated above, the rent (on a per square foot basis) for the subject’s 2-bedroom/ 1-bath unit floor plans are within a tolerable variance of the range of rents illustrated by Salishan, Oak Creek Village and The Renaissance ($0.97-$1.10 psf).

TWO-BEDROOM ONE AND A HALF, TWO BATH FLOOR PLANS


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

Subject	2BR/1.5BA	1,250	$1,089	$0.87	Subject
Salishan	2BR/2BA	1,002	$1,040	$1.04	Similar
Grove at Sunrise	2BR/2BA	965	$1,120	$1.16	Superior
Oak Creek Village	2BR/2BA	1,000	$ 970	$0.97	Similar
The Renaissance	2BR/1.5BA	840	$ 860	$1.02	Similar
Autumn Ridge	2BR/2BA	920	$ 926	$1.01	Superior



Source: KTR November 2006 Field Survey

The rent (on a per square foot basis) for the subject’s 2-bedroom/1.5 bath floor plans is lower than the rents offered at the three similar comparables (Salishan, Oak Creek Village and The Renaissance). This is not surprising since the units at the subject are larger and older than the units at the comparables. We have used the subject’s lower rent level in our pro-forma analysis.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 27

THREE-BEDROOM FLOOR PLANS


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

Subject	3BR/2BA	1,400	$1,300	$0.93	Subject
Grove at Sunrise	3BR/3BA	1,203	$1,300	$1.08	Superior
The Renaissance	3BR/2BA	1,295	$1,212	$0.94	Similar



Source: KTR November 2006 Field Survey

The effective rents for the subject’s 3-bedroom/2-bath units ($0.93 psf) are closely aligned with the effective rents at its most similar comparable, The Renaissance ($0.94 psf).

Based upon the rents illustrated by the competing properties, and the rent actually commanded by the subject property, the following rents will be processed as the property’s economic rent potential for valuation purposes in our pro-forma analysis. The subject property has been operating at stabilized conditions for several years and is capturing more than its fair share of tenants, especially in comparison to other complexes of similar vintage. The subject has slightly lower average rents than the comparables. In addition, the subject units are slightly larger. Given the high occupancy rate and general market trends, the older age and lack of gates does not appear to be recognized by the market – as the average rent levels are very near other complexes in the neighborhood with superior overall attributes. As such, the subject appears to benefit from the location.

The following table summarizes the economic rent structure estimated for the subject property:

ECONOMIC RENT POTENTIAL-CROSSWOOD PARK APARTMENTS


Name	Unit Type	Mix		Size (SF)		Total Area		Economic Rent/Unit		Economic Rent/SF		Monthly Rent		Annual Rent

Shasta	1BR/1BA		66		802		52,932	$	850	$	1.06	$	56,100	$	673,200
Sequoia	2BR/1BA		12		950		11,400	$	1,038	$	1.09	$	12,456	$	149,472
Sierra	2BR/1.5BA		81		1,250		101,250	$	1,089	$	0.87	$	88,209	$	1,058,508
Yosemite	3BR/2BA		21		1,400		29,400	$	1,360	$	0.97	$	28,560	$	342,720

	Totals/Average		180		1,083		194,982	$	1,037	$	0.97	$	185,325	$	2,223,900

HIGHEST AND BEST USE

HIGHEST AND BEST USE AS IF VACANT


Surrounding Land Uses		Predominately multifamily developments along Crosswoods Pkwy, Crosswoods Circle and San Tomas Drive and single-family residential subdivisions north of Auburn Blvd.

Physically Possible		Being situated on a heavier traveled east-west thoroughfare (Auburn Blvd.), the subject site benefits from visibility to traffic and enjoys good accessibility. Multifamily use would benefit from the site’s exposure to passing traffic.

Legally Permissible		Multifamily use is the intended use of the site.

Financially Feasible		Multifamily development has been occurring throughout the Sacramento area over the past thirty years. Economic conditions appear to be improving and as new employment opportunities present themselves, added demand for rental housing should follow.

Conclusion		New construction with townhouses, duplexes, condominiums or apartment units.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 28

HIGHEST AND BEST USE AS IMPROVED


Current Improvements		180-unit multifamily apartment complex. The existing improvements contribute significantly to overall property value indicating that the value of the improved property greatly exceeds the value of the site assuming it to be vacant.

Conclusion		Continued use of the existing improvements

VALUATION

There are three traditional approaches that can be employed in establishing Market Value. These approaches and their applicability to the valuation of the subject property are summarized as follows:

THE COST APPROACH

This method estimates the replacement or reproduction cost of the improvements, less the estimated depreciation (physical, functional, economic), plus the estimated market value of the land, in order to arrive at a final value indication. This approach is based on the premise that an informed purchaser would pay no more for a property than the cost of constructing a building of similar utility and condition.

The Cost Approach is a reliable indicator of value for: (a) new properties; (b) special use properties; and (c) properties where the cost of reproducing the improvement is easily and accurately quantified and there is no external or economic obsolescence. Due to the age of the improvements, they have incurred physical deterioration due to normal wear and usage. Given the inherent inaccuracies and subjectivity involved in estimating substantial degrees of physical deterioration, the cost approach is not considered a reliable, independent approach to value in this instance

THE SALES COMPARISON APPROACH

Using this technique, the property value is indicated by comparing the subject to similar, nearby properties that have recently sold. Essentially, the procedure is to gather bona fide, recent arm’s length sales of comparable properties and compare the most important characteristics of the sales to the subject. Adjustments are then made to the comparable properties for differences such as terms of financing, date of sale, location, and physical characteristics.

Attaining data with a high degree of comparability is most important when this technique is utilized. The reliability is dependent upon the availability of comparable sales data, the verification of the sales data, the degree of comparability and extent of adjustment necessary for differences and the absence of non-typical conditions affecting the sales price. As numerous sales of properties similar to the subject have occurred in the Sacramento area, this approach has been employed in the valuation process.

THE INCOME CAPITALIZATION APPROACH

The Income Capitalization Approach is a process in which the anticipated flow of future benefits is capitalized into a value indication. The Income Capitalization Approach is widely applied in appraising income-producing properties. The reliability of this technique is dependent upon the reliability of the net income estimate and the capitalization rate. Since the subject is income producing realty and anticipated to continue to be so, this approach has been employed in the valuation of the Fee Simple Estate.

RECONCILIATION AND FINAL VALUE ESTIMATE

The final step in the Appraisal Process is the reconciliation of the value indicators into a single value estimate. In the reconciliation or correlation, the appraiser considers the relative applicability of each of the three


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 29

approaches, examines the range between the value indications and places major emphasis on the approach that appears to produce the most reliable solution to the specific appraisal problem. The purpose of the appraisal, the type of property and the adequacy and reliability of the data are analyzed and appropriate weight is given to each of the approaches to value.

INCOME CAPITALIZATION APPROACH

Investment properties are normally valued in proportion to their ability to produce income; hence, an analysis of the property in terms of its ability to provide a sufficient net annual return on invested capital is an important means of valuing any asset. Value is estimated by deducting an appropriate vacancy and collection allowance and all applicable expenses from the anticipated gross annual income to arrive at a projected net operating income which is then capitalized at an interest rate, or investment yield, commensurate with the risk inherent in the ownership of the property. Such a conversion of projected income considers competitive returns offered by alternative investments.

There are two primary income capitalization methods: Direct Capitalization, which converts a single year’s net operating income into an indication of value and the Discounted Cash Flow Analysis (DCF), which estimates the present worth through the process of discounting the forecasted net income and the reversionary sale over the course of an anticipated investment period. The Direct Capitalization technique is employed in this analysis.

DIRECT CAPITALIZATION

The basic steps in the Direct Capitalization method are as follows:

1. Calculate POTENTIAL GROSS INCOME from the dwelling units;

2. Estimate VACANCY AND CREDIT LOSS to arrive at Effective Gross Income;

3. Estimate OPERATING EXPENSES to arrive at the stabilized Net Operating Income;

4. Develop the OVERALL CAPITALIZATION RATE;

5. Divide NOI by the CAP RATE to arrive at VALUE.

Revenue: As presented in the Economic Rent Analysis section of this report, the monthly economic rent potential is estimated at $185,325. The annual gross rent potential estimated for the apartment units total $2,223,900.

Loss to Lease: Loss to lease considers a loss in income due to leases in effect, whereby effective rental rates are lower than asking, or market, rental rates. As a percentage of the property’s gross rent potential, the historical loss to lease declined from 6.0% in 2003 to 0.0% currently as the market remained tight and the occupancy increased. Based on the previous history at the subject property, we have deducted an average loss to lease expense of 3.5% of the potential gross rent to account for long-term stabilized performance.

Concessions: Rent concessions in the market are used in an attempt to bolster occupancy at area apartments. Concessions usually consist of reduced or free rent over a portion of the lease term. As a percentage of the property’s gross rent potential, concessions amounted to 1.2% in 2003, increasing to 3.9% in 2005 and declined to 3.0% for 2006. REIS predicts that concessions will continue to decline in the Sacramento market. On a stabilized basis, concessions are projected at 2.0% of the estimated gross rent to maintain the projected occupancy. This represents a half-month rent for a 50% turnover a year.

Vacancy and Credit Loss: As of the date of inspection, the subject property was 98% occupied. Properties identified as rental income comparables within the Economic Rent Analysis section of this report illustrate occupancy levels that range from 88% to 99%, averaging 94% without the subject (94% with the subject).


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 30

The REIS data indicates an average rate near 6.5% and median rate of 4.9% in the subject’s submarket. However, the largest average vacancy level was reported for properties of similar vintage to the subject. Considering the age and quality of the subject in comparison to the comparables, a vacancy factor of 6.0% seems reasonable. In addition, a 1.5% allowance for stabilized credit loss is included. The combined vacancy and credit loss allowance equates to 7.5% of gross potential rent.

Utility Income: Included in this category is the revenue received from tenants paying or reimbursing ownership for their share of water and sewer usage. Total utility income in 2003 was $40,166, increasing to $55,857 in 2005. Reimbursement revenue was $67,846 from January 1 through October 31, 2006. Based on the historical utility income receipts, we have estimated Utility Income to be $64,000.

Other Income: Included within this category is the revenue received from such items as application fees, forfeited deposits, and late fees. As a percentage of the property’s gross rent potential, Other Income receipts ranged from 2.3% to 5.0%. Based on historical other income receipts, we have estimated Other Income to be 2.5% of the gross rent potential.

Expenses: In order to project expenses for valuation purposes, the expenses historically incurred in the operation of the subject property have been reviewed. The operating budget for the current year has also been considered. Typical operating expenses for garden apartments in the Sacramento area, as reported by IREM have been reviewed and analyzed.

The following table summarizes the 3-year operating history for the subject property and the operating performance for the first 10 months of 2006. We have annualized this on a straight line basis for comparison purposes.

The subject has been operating at stabilized conditions for the past several years with a strong market performance. No major changes in operations are expected at the subject or in the market overall. Although the market is expected to remain strong, it is anticipated that the performance trends will trend toward historical averages over the past several years.

Each category is individually discussed following the table.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 31

SUMMARY OF OPERATING HISTORY AND BUDGET


	180						180						180						180
Units	2003						2004						2005						1/1-10/31/06			2006
Year	Actual			Per Unit			Actual			Per Unit			Actual			Per Unit			Actual			Annualized			Per Unit

INCOME		—			—			—			—			—			—			—			—			—
Gross Potential Income	$	2,066,346		$	11,480		$	2,207,256		$	12,263		$	2,106,684		$	11,704		$	1,777,389		$	2,132,867		$	11,849
Loss to Lease		(86,761	)		(482	)		(132,288	)		(735	)		(4,616	)		(26	)		0			0			0
Concessions		(25,143	)		(140	)		(28,112	)		(156	)		(81,385	)		(452	)		(54,784	)		(65,741	)		(365	)
Vacancy/Credit Loss		(165,358	)		(919	)		(307,360	)		(1,708	)		(166,174	)		(923	)		(110,644	)		(132,773	)		(738	)
Utility Income		40,166			223			46,989			261			55,857			310			67,846			81,415			452
Other Income		105,637			587			71,826			399			48,703			271			54,344			65,213			362
Effective Gross Income	$	1,934,887		$	10,749		$	1,858,311		$	10,324		$	1,959,069		$	10,884		$	1,734,151		$	2,080,981		$	11,561

EXPENSES
Utilities	$	93,169		$	518		$	160,261		$	890		$	143,585		$	798		$	134,099		$	160,919		$	894
Contract Services		110,885			616			100,956			561			79,067			439			76,121			91,345			507
Repairs & Maintenance		46,005			256			38,889			216			39,057			217			23,658			28,390			158
Turnover		117,077			650			87,657			487			63,691			354			52,549			63,059			350
Administration		99,206			551			64,160			356			81,569			453			75,518			90,622			503
Marketing		51,222			285			45,649			254			56,669			315			56,914			68,297			379
Payroll		180,343			1,002			230,557			1,281			239,689			1,332			194,050			232,860			1,294
Management		86,150			479			81,692			454			84,531			470			74,845			89,814			499
Insurance		44,501			247			46,807			260			44,833			249			44,125			52,950			294
Real Estate Taxes	$	128,344		$	713		$	135,132		$	751		$	137,161		$	762		$	118,178		$	141,814		$	788
																							0			0
Total Expenses	$	956,902		$	5,316		$	991,760		$	5,510		$	969,852		$	5,388		$	850,057		$	1,020,068		$	5,667


Utilities:		This expense covers the cost of electricity, water and sewer and gas usage for the property. The subject’s historical utilities expense was $518 per unit in 2003, increased in 2004 to $890 per unit and then declined slightly to $798 per unit in 2005. Based on current costs between approximately $800 and $900 per unit, utilities are processed at $850 per unit.

Contract Services:		This category includes those services that are out-sourced such as pool service, extermination, trash removal, courtesy patrol, etc. The subject’s historical contract services expense declined over the past 3 years from $616 per unit to $439 per unit as turnover has decreased. The contract services expense is estimated at $540 per unit based on historical operations.

Repair & Maintenance:		This category includes general repair and maintenance items. The subject’s historical repair and maintenance expense has also declined over the past several years from $256 to $217 per unit. Again, fewer units were vacated and required maintenance and repairs. We have chosen an historical average amount of $230 per unit in our analysis.

Turnover:		This category includes the cleaning, painting and remodeling of units when tenants move out. The subject’s turnover expense has also declined as the market has improved from $650 per unit to $354 per unit. Given historical trends and the expectation of a return to stabilized conditions, a turnover expense is estimated at $500 per unit.

Administrative:		Office expenses, telephone, management unit expenses, computer maintenance and supplies, professional fees and miscellaneous expenses are covered in this category. The subject’s historical administrative expense has fluctuated between $356 and $551 per unit. Based upon historical trends, an administrative expense of $460 per unit is included.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 32


Marketing:		Included in this category are all newspaper and printed advertising, payments to locator services, leasing commissions, and resident referrals. The subject’s historical marketing expense has fluctuated between $254 and $315 per unit. Based upon historical trends, a marketing expense of $320 per unit is projected.

Payroll:		This expense covers salaries, payroll taxes, and workers compensation insurance for on site management, leasing, and maintenance personnel. The subject’s historical payroll expense has increased dramatically over the past several years from $1,002 to $1,332 per unit. Payroll expenses are projected at $1,350 per unit based on current operations grown by the inflation factor.

Management:		A typical management fee on a property of this type is 3% to 5% of the effective gross income. The subject’s historical management fee has been based on an amount equivalent to approximately 4.4% of Effective Gross Income. However, management contracts are reported to be somewhat competitive due to the strong market. A market-oriented fee of 3.5% is reasonable.

Insurance:		This expense item covers the building and includes fire, extended coverage, vehicle, and owner’s liability. The subject’s historical insurance has been relatively stable during the past several years, between $247 and $260 per unit. Insurance expenses are projected at $260 per unit based on current operations grown by the inflation factor.

Real Estate Taxes:		Real estate taxes are processed as discussed within the Real Estate Assessment and Tax Analysis section of this appraisal. The real estate tax projection for 2006 is $171,000, which is the projected, hypothetical sale amount in the sales comparison approach ($15,750,000) at the current tax rate of 1.08532%.

Reserves for Replacements:		In addition to the repairs and maintenance expenditures, the property will incur annual capital expenditures to keep it in prime condition. A reserve category is typical for multifamily property; therefore we have included reserves as an additional budget item. Reserves for replacement for a property of this vintage typically range from $200 to $400 per unit. Given the condition of the property, a reserve for replacement allowance of $250 per unit, or $45,000 is estimated for the subject property.

Total Expenses:		Total expenses have been estimated at $1,099,368 or $6,108 per unit inclusive of reserves. Information provided by the Institute of Real Estate Management (IREM) indicates that operating expenses for Sacramento have a median expense level (exclusive of reserves) of $4,187. Since the subject is 30 years old, it is not surprising that it would have a higher expense level than many of its competitors. Industry standard expense data suggests that the total expenses estimated for the subject property are reasonable.

Net Operating Income: The Net Operating Income is that amount of the income remaining after paying all operating expenses. This affords the owner capital to satisfy debt service, if any, and provides a return on owner’s equity.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 33

We have estimated the NOI to be $945,425. The subject’s income and expense pro forma is summarized on the following table.

OPERATING PRO FORMA


INCOME		Amount			Per Unit

Gross Rent Potential	Estimated Market	$	2,223,900		$	12,355
Loss to Lease	3.5% of Gross Rent Potential		($77,837	)		($432	)
Concessions	2.0% of Gross Rent Potential		($44,478	)		($247	)
Vacancy/Credit Loss	7.5% of Gross Rent Potential		(166,793	)		($927	)
Utility Income	Current Average, Rounded		60,000		$	333
Other Income	Current Average, Rounded		50,000		$	278

Effective Gross Income		$	2,044,793		$	11,360

EXPENSES		Amount			Per Unit			Percent of EGI
Utilities	Current Average, Rounded	$	153,000		$	850			7.5	%
Contract Services	Long-term Average, Rounded		97,200			540			4.8	%
Repairs & Maintenance	Long-term Average, Rounded		41,400			230			2.0	%
Turnover	Long-term Average, Rounded		90,000			500			4.4	%
Administration	Long-term Average, Rounded		82,800			460			4.0	%
Marketing	Long-term Average, Rounded		57,600			320			2.8	%
Payroll	Current Grown		243,000			1,350			11.9	%
Management	3.5% of EGI		71,568			398			3.5	%
Insurance	Current Grown		46,800			260			2.3	%
Real Estate Taxes	Based on Sales Approach		171,000			950			8.4	%
Reserves	$250 per Unit		45,000			250			2.2	%

Total Expenses		$	1,099,368		$	6,108			53.8	%

NOI		$	945,425		$	5,252			46.2	%

Capitalization: Capitalization rates express relationships between net income and total value. The rate employed must be consistent with and reflective of those rates currently employed by investors active in the market place.

In order to perform this analysis, estimates of an appropriate capitalization rate must be formed. By its nature this is a judgmental process, however, selected rates should approximate the investment perimeters expected to be employed by the most probable buyer for the subject property.

Several approaches are typically followed in selecting the investment parameters; review and analysis of alternative real estate and non-real estate investments; review and analysis of published real estate investor surveys; derivation of rates from empirical market data; and use of in-house experience with similar types of investments.


Most Probable Buyer:		Considering the size and quality of the asset, the subject buyer would most likely attract national or regional investors. In addition, local buyers may be interested in the condominium conversion possibilities due to the location, size and housing market.

Market Extraction:		The following table summarizes the market derived overall rates. The sales are further detailed in the Sales Comparison Approach.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 34

SUMMARY OF MARKET DERIVED OVERALL RATES


	Sale 1	Sale 2	Sale 3	Sale 4	Sale 5

Name	Oak Hollow	Spring Creek	Windward Village	University Village	Village at Carmichael
Sale Date	Nov-06	Aug-06	Jul-06	Jan-06	Dec-05
Cap Rate (OAR)	5.4%	6.1%	7.0%	6.6%	5.6%


		The sales exhibit overall rates that fall within a range from 5.4% to 7.0% and produce an average of 6.1%. The sales represent recent transactions of 1970’s and mid-1980’s vintage apartment complexes that are generally similar to the subject property in terms of construction and physical characteristics. The comparable properties are in Sacramento area locations that demonstrate generally similar demographic characteristics of the subject neighborhood. The capitalization rates indicated by the sales data are representative of an appropriate rate that would be applicable to the subject property. Based on the indicators exhibited by market data and recent trends, a capitalization rate of approximately 6.0% is suggested.

Survey of Investors:		Real Capital Analytics surveys apartment sales throughout the United States. In their Apartment Capital Trends Monthly Report for November 2006, Real Capital Analytics reports that for the 12 months ending in October 2006, the average cap rate for apartment sales in the Sacramento area was 5.8%. Furthermore, Real Capital Analytics reports that the median cap rate for apartment sales in the Sacramento area for the 12 months ending October 2006 was 5.82%. Since the subject property is a Class “B” complex, one would expect its cap rate to be slightly higher than the market averages.

OAR Conclusion:		The sales exhibit overall rates that range from 5.4% to 7.0% and produce an average of 6.1%. Published investor surveys suggest that an appropriate cap rate for the subject property is above 5.82%. Based on the indicators exhibited by the sales data and confirmed through review of investor surveys, an appropriate cap rate for the subject property is concluded to be 6.0%.

Valuation: Capitalizing the estimated Net Operating Income results in a value conclusion of $15,500,000, rounded ($945,425 NOI ¸ 6.0% OAR = $15,757,083).


Final Value:		$15,750,000

SALES COMPARISON APPROACH

The Sales Comparison Approach to value is the process of comparing recent sales of competitive properties. The estimated value derived via this approach represents the probable price at which the subject property would be sold by a willing seller to a willing buyer as of the date of value.

To estimate the property value by the Sales Comparison Approach, five multifamily apartment building sales, which are summarized in the following table, have been examined and analyzed. All of the sales are garden style apartments with similar physical characteristics within the Sacramento area apartment market. The appraisal indicators exhibited by the sales data outlined in the following chart are utilized for purposes of estimating a value for the subject via the Sale Comparison Approach.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 35

The price per apartment unit has been relied upon as the unit of comparison in this approach. The comparative process involves judgment as to the similarity between the subject property and the comparable sale property with regard to a variety of factors affecting value such as location, age and condition of the structure, market conditions, rent levels, property rights conveyed, financing terms, conditions of sale, operational efficiencies and other factors.

ANALYSIS OF SALES: This approach relies on an active market. Sufficient data from the Sacramento area exists to formulate a value via the Sales Comparison Approach. Below are 5 sale comparables of similar vintage garden style apartments with similar characteristics to the subject property.

SUMMARY OF COMPARABLE BUILDING SALES


Sale No.	1	2	3	4	5

Name	Oak Hollow	Spring Creek Apts.	Windward Village	University Village	Village at Carmichael
Location	4407 Oakhollow Drive	7761 Greenback Lane	3130 Occidental	7767 La Riviera	8732 Fair Oaks Blvd.
	Sacramento, CA	Citrus Heights, CA	Dr. Sacramento, CA	Dr. Sacramento, CA	Carmichael, CA

Sales Price	$36,100,000	$22,800,000	$11,800,000	$21,630,312	$11,446,000
Sale Date	03-Nov-2006	1-Aug-2006	19-July-2006	17-Jan-2006	29-Dec-2005
Year Built	1985	1985	1974	1979	1972
No. of Units	434	196	168	250	148
Net Rentable Area (SF)	374,150	200,460	126,000	185,642	109,525
Occupancy	92%	95%	94%	95%	92.5%

Price/SF	$96.49	$113.74	$93.65	$116.52	$104.51
Price/Unit	$83,180	$116,327	$70,238	$86,521	$77,337
Net Income	$1,961,933	$1,395,000	$836,126	$1,430,779	$636,752
NOI/SF	$5.24	$6.96	$6.64	$7.71	$5.81
NOI/Unit	$4,521	$7,117	$4,977	$5,723	$4,302

Cap Rate (OAR)	5.4%	6.1%	7.0%	6.6%	5.6%
EGIM	9.93	10.26	7.80	8.41	8.87
Expense Ratio (OER)	42%	35%	42%	42%	47%

The sales indicate per unit prices that range from $70,238 to $116,327. All of the comparables represent sales of apartments that are of similar construction componentry as the subject. All of the sales are similar as to the subject property in terms of location and physical condition. However, Comps. 1 and 2 are newer than the subject property. Situated throughout the eastern area of the Sacramento metro area, minor differences exist as to the specific location of each comparable and subject property.

The primary difference between the comparables and the subject are location, age and average unit size. The most value influencing difference between the subject and the comparable sales is the amount of net operating income generated on a per unit basis. In an attempt to quantify appropriate adjustments to the prices indicated by the comparables, we have analyzed the difference between the net operating income (NOI) per unit of the comparables relative to the NOI of the subject property. In this analysis we have adjusted the sale price of the comparables based on the percentage difference in net income. As discussed in the Income Approach section of the report, the NOI estimated for the subject property equates to $5,315 per unit. The adjustments applied to the comparable sales are depicted below.

PRICE PER UNIT ANALYSIS


Sale No.	Price/Unit	Subject NOI/Unit	Comparable NOI/Unit	Adjustment Factor	Adjusted Price/Unit

1	$ 83,180	$5,252	$4,521	1.16	$96,636
2	$ 116,327	$5,252	$7,117	0.74	$85,850
3	$ 70,238	$5,252	$4,977	1.06	$74,124
4	$ 86,521	$5,252	$5,723	0.92	$79,406
5	$ 77,337	$5,252	$4,302	1.22	$94,422


*		Adjustment Factor = (Subject NOI per Unit / Comparable NOI per Unit)


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 36

The adjusted range of per unit prices is $74,124 to $96,636. The mean adjusted unit price is $86,087. As no one sale requires a significant degree of adjustment, most emphasis is placed on the mean in concluding to a value of $87,100 per unit for the subject property. Utilizing this per unit value estimate, the total value of the subject property is estimated at $15,498,000 ($86,100 X 180 units). This is rounded to $15,500,000. Note that the NOI includes taxes based on a total property value of $15,750,000.

EGIM ANALYSIS: The sales illustrate EGIMs that range from 7.80 to 10.26. Important in selecting an appropriate EGIM is the review of corresponding operating expenses. There is an inverse relationship that generally holds among EGIMs and operating expenses. Properties that have higher expense ratios typically sell for relatively less and therefore produce a lower EGIM. The operating expense ratios for the sales range from 35% to 47% (with reserves).

In selecting an appropriate EGIM, consideration must be given to the operating expense ratio estimated for the subject. Based on the income and expenses estimated for the subject property in the income capitalization approach, the subject’s operating expense ratio is calculated at 53.8% (with reserves). The subject’s expense ratio is higher than the comparable data. An EGIM for the subject at 7.8 near the bottom of the range is reasonable considering the subject’s higher expense level.

Based on the effective gross income estimated for the subject property in the Income Capitalization Approach, an indication of $15,900,000 (rounded) is concluded using the EGIM.

$2,044,793 x 7.8 = $15,949,385 or $16,000,000, rounded

CONCLUSION: The noted value indicator utilizing the sales price per unit method is $15,500,000 and the EGIM method is $16,000,000. The price per unit method may understate the value due to the way the real property taxes are estimated using the higher hypothetical sale price. Conversely, the EGIM method may overstate the value due to the higher expense ratio at the subject. A value between the two is reasonable. As such, the Market Value of the subject property’s Fee Simple Interest via the Sales Comparison Approach is estimated at:


Value via the Sales Comparison Approach		$15,750,000

RECONCILIATION


Cost Approach		Not Applicable
Income Capitalization Approach		$15,750,000
Sales Comparison Approach		$15,750,000

Income and Sales approaches to value were employed in the appraisal of the subject property. Buyers and sellers rarely rely on the Cost Approach to price commercial real estate. Furthermore, the age of the improvements and subjectivity involved in estimating substantial degrees of physical deterioration reduces the reliability of this approach. As such, a Cost Approach was not employed.

The value derived from the Income Capitalization Approach is well documented and market oriented. The indicated value is consistent with the projected tax amount, which has the tax expense based on a hypothetical sale at $15,750,000 based on the sales approach.

The local market is active in terms of investment sales of similar apartment complexes and sufficient sales data was available to develop a defensible value via the Sales Comparison Approach. The value derived



Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Addenda

STEVEN J. GOLDBERG, MAI, CCIM
SENIOR MANAGING DIRECTOR — VICE PRESIDENT

STEVEN J. GOLDBERG is Manager of the Dallas Appraisal Division of KTR Valuation & Consulting Services, LLC. His responsibilities include staff supervision, appraisal management, maintaining product quality, marketing and client development. In his current capacity, Mr. Goldberg oversees all valuation assignments involving real estate assets located in the Southwest region.

Mr. Goldberg has over 23 years of nationwide experience in real estate valuation, investment analysis and evaluation consultation. He has performed appraisals throughout the United States and has extensive experience in most markets situated in the Southwest and Southeast regions of the country. Mr. Goldberg’s particular area of expertise is in the appraisal and analysis of multifamily apartment projects. In addition to his expertise in the multifamily market, Mr. Goldberg has extensive experience in the appraisal of other income-producing properties including office buildings, retail properties, lodging facilities, industrial properties and mixed-use projects.

Mr. Goldberg has performed marketability, consultation and feasibility reports, has served as an expert witness and has testified in various state and federal courts. These activities have been performed on behalf of real estate investors, life insurance companies, pension funds, investment banking firms, foreign and domestic financial institutions, mortgage bankers, conduit lenders, real estate advisors, law firms and governmental agencies.

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

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



Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Addenda

DEAN HOBART
SENIOR MANAGING DIRECTOR — VICE PRESIDENT

DEAN HOBART is manager of Chicago office for KTR Valuation & Consulting Services LLC, at 224 S. Michigan Avenue, Chicago, Illinois 60604. His direct telephone number is 312-386-3194. Mr. Hobart has over 12 years of nationwide experience in residential and commercial appraisal, analysis and evaluation. He has extensive experience in many markets in California and in the Midwest and Southeast regions of the country. Prior to relocating to the Chicago office in 2001, Mr. Hobart was a senior appraiser at the New York City office of KTR, where he performed appraisals on a wide variety of commercial properties throughout the New York City metropolitan region, New England, Atlantic Seaboard and Southern sections of the country. During his appraisal career, Mr. Hobart has been involved with numerous projects with construction, zoning, development, environmental, or soil stabilization issues as a major component of the valuation assignment, including Phase I Environmental Site Assessments and Property Physical Condition Surveys.

As an appraiser, Mr. Hobart also worked at the New York City office of Grubb & Ellis Company (prior to and after it acquired Landauer Associates) where he performed appraisals for litigation support, right-of-way, property tax appeals, partnership interests and arbitration. Mr. Hobart has also been employed as an independent fee appraiser in Los Angeles, California where he performed apartment, special use, and residential appraisals for lending, income tax, property tax, insurance adjustment and feasibility purposes. He was appointed by the Los Angeles County Superior Court for 2 terms as a Real Estate Mediator for the Alternate Dispute Resolution (ADR) Program and was licensed at the time as a California Certified Residential Real Estate Appraiser and was a member of the Los Angeles County Board of Realtors and a licensed Real Estate Broker.

As an architect from 1981 to 1994, Mr. Hobart performed work on a wide variety of office buildings, acute care hospitals, banks, high-end residential projects, land use planning and construction management. He received his Bachelor of Architecture with a concentration in Planning and Historic Preservation at the University of Texas at Austin and also attended the Graduate School of Business with coursework in Real Estate and Finance. Mr. Hobart is an AIA Member in the American Institute of Architects and is a General Associate Member of the Appraisal Institute as an MAI Candidate.


Current License Listing
California Licensed Architect #C21442		Expires April 30, 2007
Georgia Certified General Real Property Appraiser #249837		Expires April 30, 2007
Illinois Real Estate Appraiser #172.0001999		Expires February 2, 2007
Michigan Certified General Appraiser #1201068783		Expires July, 31, 2008
New York Real Estate General Appraiser #46000039228		Expires December 5, 2008
Ohio Certified General Real Estate Appraiser #2006000890		Expires March 9, 2007
Pennsylvania Certified General Appraiser #GA003525		Expires June 30, 2007
South Carolina Certified General Appraiser #CG5631		Expires June 30, 2007
Virginia Certified General Real Estate Appraiser #4001010796		Expires February 29, 2008

Court Appointments and Testimony
Franklin County Ohio Real Property Tax Court – Expert Witness
Los Angeles County California Real Property Tax Court – Expert Witness
Los Angeles County California Superior Court – Court Appointed Real Estate Mediator
Montgomery County Ohio Real Property Tax Court – Expert Witness



Crosswood Park Apartments		December 8 2006
Citrus Heights, California		Addenda

JOHN GROCHOWIAK
APPRAISER

JOHN GROCHOWIAK is an Appraiser in the Chicago Office of KTR Valuation & Consulting Services, LLC (KTR).

Mr. Grochowiak has over 16 years of experience in the valuation and financial analysis of securitized obligations, including credit card receivables, home equity loans, single- and multi-family mortgages and collateralized commercial mortgage deals (CMBS).

Prior to joining the Chicago office in 2005, Mr. Grochowiak had been employed at The Industrial Bank of Japan (now The Mizuho Group), New York City, where he was a Vice President in charge of sales and marketing for the Asset Management and Trust Division. Mr. Grochowiak had previously worked as a Portfolio Manager at the Capital Markets Division of JP Morgan Chase in New York City. Mr. Grochowiak was Vice President for Bank of America’s Institutional Trust Division in Los Angeles, where he managed a team of Trust Officers who specialized in asset-backed transactions. He was responsible for the due diligence valuation of the Institutional Trust Division’s strategic acquisition targets. He also conducted nationwide compliance training sessions in accordance with Federal Reserve Guidelines. He had previously worked for the US Trust Company (now the Charles Schwab Company) in Los Angeles, where he was an Assistant Vice President in the Asset Management Division responsible for investment trust analysis and risk management. Mr. Grochowiak began his career as a municipal trust manager at Bank of America (formerly Security Pacific) in San Francisco.

Mr. Grochowiak received his Bachelor of Arts Degree in Economics from The University of Chicago. He has completed the State of Illinois qualifying education for the Illinois Associate Real Estate Appraiser License.

Mr. Grochowiak is an Associate Member in the Chicago Chapter of the Appraisal Institute and is an MAI Candidate. He was a Level 2 Candidate in the CFA Program as sponsored by AIMR (Association for Investment Management and Research) and is a Certified Corporate Trust Specialist.


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Page 37


Crosswood Park Apartments Citrus Heights, California		December 8 2006 Addenda