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ROBERT D. WRIGHT, MAI

MULTIFAMILY VALUATIONS

June 28, 2006

Scott Kyriakakis
Reilly Mortgage Group, Inc.
2010 Corporate Ridge Parkway, Suite 1000
McLean, VA 22102


REFERENCE:		RIVERSIDE PARK APARTMENTS 2000 Huntington Avenue, Alexandria (outside) Fairfax County, VA 22303 1,222 apartment units plus commercial retail and office space

Dear Mr. Kyriakakis:

In accordance with your request, I have prepared an appraisal of the captioned property. The purpose of the appraisal was to estimate the Market Value of the subject property as currently operated as a rental apartment project as of May 25, 2006. The subject property is currently being readied for a major renovation plan that will re-position the subject property. Per the client/lender’s request, the subject property has been appraised assuming habitable condition with stabilized occupancy. This report has been prepared in conformance with the Code of Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute and the Appraisal Foundation. This report has also been prepared in accordance with Freddie Mac appraisal guidelines and the appraisal requirements of Reilly Mortgage Group, Inc. Neither the assignment to make this appraisal nor the compensation for it is contingent upon the appraised value of the subject. This is a complete appraisal transmitted in a self-contained narrative format.

Based upon an inspection of the subject, a review of available operating history and in consideration of local market data, the subject’s estimated Market Value as of May 25, 2006 assuming habitable condition with stabilized occupancy is:

ONE HUNDRED FORTY NINE MILLION DOLLARS
($ 149,000,000)

A substantial renovation of the subject is in process. This appraisal assumes habitable condition prior to renovation in accordance with the client’s request. The cost to complete the renovation of units already gutted for rehabilitation is not considered herein. It is noted that the subject’s actual physical vacancy rate (20.6%) was elevated as of the date of inspection/valuation since the owners had commenced lease terminations to create vacancies for the proposed renovation.

GENERAL APPRAISER CERTIFICATION IN PA, NJ, NY, DE, MD, DC & VA

11 South Brookside Road/Springfield, PA 19064 · (610)543-0303 · Fax (610)543-5978 ·Email: RDW@RobertDWright.com

SUMMARY OF SALIENT FACTS & CONCLUSIONS


Subject Property	Riverside Park 2000 Huntington Avenue Alexandria, VA 22303

County	Fairfax

Census Tract Number	4204.00

Tax Parcel Identification	0833 01 0101

Owner of Record	AIMCO Riverside Park LLC

Land Area (acres)	28.1713	1804 Parking Spaces

Improvements	Three 15-story elevator-served masonry rental apartment towers totaling 1,222 residential units plus ancillary commercial office and retail space. The subject was partially renovated with upgraded kitchens, etc. in the 1980’s

Year Built	1968-70

Overall Condition	Average — “As Is“condition prior to renovation


Unit Mix & Sizes	Type(Bdrm)		# Units		Mix			Avg SF
	Eff/1 Bath			14		1.1	%		289
	Eff/1 Bath			140		11.5	%		500
	Eff/1 Bath			70		5.7	%		550
	1 Bdrm/1 Bath			741		60.6	%		820
	2 Bdrm/2 Bath			257		21.0	%		1,134
	Total			1222
Net Rentable Area		1,011,604	square feet					828 SF/Unit
Total Number of Rooms		4,199						3.4 Rooms/Unit


Date of Inspection		25-May-06

Valuation Premise		The appraiser has estimated the market value of the subject assuming habitable condition on a stabilized basis at market rents and expenses free and clear of existing financing.

Conclusions


Income Approach			$	149,000,000
Potential Gross Income (net of concessions)			$	16,631,175
Vacancy & Collection Losses	6.5	%		(972,269	)
Effective Gross Income				15,658,906
Expenses & Reserves	40.4	%		(6,718,400	)	$5,498 per unit
Net Operating Income			$	8,940,506
Overall Capitalization Rate				6.0	%
Sales Comparison Approach			$	147,900,000
Cost Approach			Not Applied
Final Value Conclusion			$	149,000,000
Value per unit			$	121,931
PGIM				9.0
Overall Rate				6.0	%

This appraisal assignment was completed without the benefit of current engineering and environmental site assessment reports. If subsequently completed reports reveal the need for significant immediate repairs or if significant environmentally hazardous conditions exist, this valuation would be adversely impacted. The subject’s vacancy rate was elevated as of the inspection/valuation date.



RIVERSIDE PARK APARTMENTS		1

PROPERTY RIGHTS APPRAISED

This appraisal is for the fee simple ownership interest in the real property. It is noted that while the subject is operated as a rental apartment project with individual apartment leases encumbering each apartment, these leases have remaining terms of 1 year or less and are at or close to the estimated market rent levels for these units. Since no significant leasehold interest exists at the subject, the value of the leased fee is considered to be equivalent to the fee simple value.

PURPOSE, INTENDED USE AND DATE OF APPRAISAL

The purpose of this appraisal is to provide an opinion of the subject’s market value of the real property in its “As Is” condition assuming assumes habitable condition prior to renovation with stabilized operations as of the effective date of value, May 25, 2006. It is understood that the intended use of this appraisal is for Freddie Mac mortgage underwriting by Reilly Mortgage Group, Inc., the intended user. Other uses of this appraisal are not intended.

DEFINITION OF MARKET VALUE

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, 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:

	a)		a buyer and seller are typically motivated;

	b)		both parties are well informed or well advised, and acting in what they consider their best interests;

	c)		a reasonable time is allowed for exposure in the open market;

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

	e)		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.

Source: Federal Register, vol. 55, no. 163, August 22, 1990, pages 34228 and 34229.



RIVERSIDE PARK APARTMENTS		2

SCOPE OF THE APPRAISAL

This appraisal included an interior and exterior inspection of the subject by Robert D. Wright, MAI on May 25, 2005. A total of 25 units were inspected by the appraiser. The appraiser inspected 40 units during a previous inspection in May 2005. Research included field inspection of comparable properties and interviews of rental agents, owners, managers, real estate agents and appraisers. Information was also obtained from sales data services, assessment office records and the appraiser’s personal data files.

The Income Approach and Market Approach have been applied with supporting data. The Cost Approach is not applied since investors and lenders do not typically rely upon this approach for valuation of an older vintage rental project like the subject. The omission of the Cost Approach from this valuation is not considered to weaken the reliability of this appraisal. An Insurable Value has been included in the addenda per the client’s request.

REGIONAL DATA

The subject is located in Fairfax County, VA and has an Alexandria mailing address. This area is part of the Washington, DC metropolitan region which includes areas of Maryland, West Virginia and Northern Virginia comprising about 5,600 square miles. The U.S. Office of Management and Budget defines the Washington-Arlington-Alexandria, DC-VA-MD-WV Metropolitan Statistical Area (MSA) as including: the District of Columbia; the Maryland counties of Calvert, Charles, Frederick, Montgomery and Prince George’s; the Virginia counties of Arlington, Clarke, Fairfax, Fauquier, Loudoun, Prince William, Spotsylvania, Stafford and Warren; the West Virginia county of Jefferson; and the Virginia cities of Alexandria, Fairfax City, Falls Church, Fredericksburg, Manassas and Manassas Park. Although separately governed, these cities and counties share common historical, geographic and socioeconomic trends. This region represents the southern end of the densely populated Northeast Corridor, which runs from Washington north to Boston and includes metropolitan Baltimore, Philadelphia, and New York.

The Washington, DC MSA is at the hub of a well-developed highway network that allows access to the major urban centers of the northeast corridor. I-95, a major north-south route, connects with the Washington Beltway, I-495, which encircles the city. Paralleling I-95 northeast of the city is the Baltimore-Washington Parkway. I-95 and the parkway connect the two cities of Baltimore and Washington. I-95 then continues north to Philadelphia, New Jersey and New York. I-95 south of Washington connects with Richmond. Route 50 intersects with New York Avenue and the Beltway and continues east to Annapolis. I-270 northwest of Washington connects with the Beltway in Montgomery County. It connects the city with I-70 in Frederick, Maryland. I-70 continues west to the Pennsylvania Turnpike.

Besides a well-developed highway network, the region is served by an integrated public transportation system administered by the Washington Metropolitan Transit Authority. The centerpiece of the “Metro” system is a modern rapid rail transit network with lines emanating from downtown Washington into the suburbs. Bus routes provide transportation between rail lines and into other parts of the region. Union Station in Washington is a major terminal for inter-city and commuter rail transportation supplied by Amtrak, Maryland Area Rail Company (MARC) and Virginia Rail. Reagan National Airport, Dulles International and Baltimore-Washington International airports all provide air service to the Washington region.



RIVERSIDE PARK APARTMENTS		4

Washington, DC MSA Population 1990-2006


							%/yr.			Density/
County/City	1990		2000		2006		90-06			Square Mile
District of Columbia		606,900		572,059		546,363		-0.7	%		8,957
Calvert County, MD		51,372		74,563		90,418		3.6	%		421
Charles County, MD		101,154		120,546		141,109		2.1	%		307
Frederick County, MD		150,208		195,277		224,502		2.5	%		339
Montgomery County, MD		762,394		873,341		935,134		1.3	%		1,890
Prince George’s County, MD		723,901		801,515		855,332		1.0	%		1,760
Alexandria City, VA		111,526		128,283		132,028		1.1	%		8,802
Arlington County, VA		170,997		189,453		189,755		0.7	%		7,298
Clarke County, VA		12,101		12,652		14,199		1.0	%		81
Fairfax City, VA		20,065		21,498		23,098		0.9	%		3,850
Fairfax County, VA		817,677		969,749		1,017,547		1.4	%		2,570
Falls Church City, VA		9,192		10,377		11,222		1.3	%		5,611
Fauquier County, VA		48,646		55,139		64,927		1.8	%		100
Fredericksburg City, VA		19,023		19,279		21,288		0.7	%		1,935
Loudoun County, VA		86,575		169,599		265,149		7.2	%		511
Manassas City, VA		27,754		35,135		38,066		2.0	%		3,807
Manassas Park City, VA		7,483		10,290		12,571		3.3	%		6,286
Prince William County, VA		215,140		280,813		360,616		3.3	%		1,067
Spotsylvania County, VA		57,407		90,395		119,084		4.7	%		297
Stafford County, VA		61,331		92,446		122,436		4.4	%		454
Warren County, VA		26,142		31,584		35,038		1.8	%		164
Jefferson County, WV		35,926		42,190		49,562		2.0	%		236

Totals		4,122,914		4,796,183		5,269,444		1.5	%		937

Source: U.S. Census Bureau and Claritas Inc.

The Washington, DC regional population is expected to grow 7.9% to 5,685,999 by 2011 according to Claritas projections.



RIVERSIDE PARK APARTMENTS		6

Housing Units

The total number of housing units in the region, like the population, has steadily increased during the past two decades. The total number of housing units increased 27.2% or 1.5% per year between 1990 and 2006 from 1,633,371 to 2,077,935. The following chart summarizes housing growth in the region since 1980 and includes a 2011 projection.

Washington, DC MSA Housing Units
1980-2011

Sources: U.S. Census Bureau and Claritas Inc.

Housing growth within the region follows population growth trends with both the total number of housing units and population increasing at an average rate of approximately 1.5% per year since 1990. The District of Columbia population decreased at an average annual rate of 0.7% while the total number of housing units decreased at an average annual rate of 0.2%. Between 2000 and 2006, the District of Columbia population decreased 4.5% while housing units decreased 2.1%. Counties and select Virginia cities in this region reported population growth ranging from 0.7% to 7.2% per year and housing unit increases of 0.4% to 6.8% per year since 1990. Loudoun County, Virginia is at the upper end of these ranges. The close-in counties bordering Washington, DC exhibited smaller growth rates in population and housing due to their built-up conditions. The following table shows the average annual percentage change in the number of housing units for each of the component areas of the Washington, DC MSA since 1990.



RIVERSIDE PARK APARTMENTS		7

Washington, DC MSA Housing Units 1990-2006


							%/yr.
County/City	1990		2000		2006		1990-2006
District of Columbia		278,489		274,845		269,149		-0.2	%
Calvert County, MD		18,974		27,576		33,079		3.5	%
Charles County, MD		34,487		43,903		51,884		2.6	%
Frederick County, MD		54,872		73,017		83,980		2.7	%
Montgomery County, MD		297,939		334,632		359,416		1.2	%
Prince George’s County, MD		267,874		302,378		320,639		1.1	%
Alexandria City, VA		58,347		64,251		68,253		1.0	%
Arlington County, VA		84,904		90,426		91,098		0.4	%
Clarke County, VA		4,531		5,388		6,107		1.9	%
Fairfax City, VA		7,850		8,204		8,825		0.7	%
Fairfax County, VA		307,682		359,411		385,494		1.4	%
Falls Church City, VA		4,493		4,725		4,949		0.6	%
Fauquier County, VA		17,682		21,046		24,923		2.2	%
Fredericksburg City, VA		8,061		8,888		9,740		1.2	%
Loudoun County, VA		33,066		62,160		95,386		6.8	%
Manassas City, VA		10,160		12,114		12,906		1.5	%
Manassas Park City, VA		2,485		3,365		4,150		3.3	%
Prince William County, VA		74,598		98,052		127,063		3.4	%
Spotsylvania County, VA		20,485		33,329		43,773		4.9	%
Stafford County, VA		20,563		31,405		41,549		4.6	%
Warren County, VA		11,223		13,299		14,700		1.8	%
Jefferson County, WV		14,606		17,623		20,872		2.3	%

Totals		1,633,371		1,890,037		2,077,935		1.6	%

U.S. Census Bureau and Claritas Inc.

The housing market in the greater Washington, DC region has been strong with increases to supply and rising property values.



RIVERSIDE PARK APARTMENTS		8

Continued growth in regional population and housing is anticipated due to the stability of the economic base of this region. The net increase in at-place regional jobs was 76,300 or 2.7% between March 2005 and March 2006. Jobs in the service industries comprise the bulk of employment within this region with government-related employment continuing as a staple of area employment.

Washington, DC MSA Employment By Industry


Industry	March 2005		March 2006		Change		% of Total
Construction & Mining		177,600		186,300		8,700		6.3	%
Manufacturing		65,300		64,700		-600		2.2	%
Trade, Transportation & Utilities		400,100		408,300		8,200		13.8	%
Information		100,300		99,500		-800		3.4	%
Financial Activities		158,600		161,800		3,200		5.5	%
Professional & Business Services		631,400		660,200		28,800		22.3	%
Educational & Health Services		311,400		319,800		8,400		10.8	%
Leisure & Hospitality		238,900		248,800		9,900		8.4	%
Other Services		165,600		168,400		2,800		5.7	%
Government		629,900		637,600		7,700		21.6	%

Total Non-farm		2,879,100		2,955,400		76,300		100.0	%

Source: U.S. Department of Labor, Bureau of Labor Statistics

Government-related employment is a large sector in the number of industry workers. The government and related bureaucracy are also the engines that power the other industries, especially the service-related industries. Service related industries account for nearly half of all employed individuals. This region is noted for its relative lack of industrial and warehouse facilities as compared to other large metropolitan areas.

Suburban economic centers developed around the central core of Washington in the 1980’s. Emerging economic centers in the Virginia suburbs include Ballston-Rosslyn in Arlington and Tysons Corner in Fairfax County. Rockville-Gaithersburg in Montgomery County and Greenbelt-Laurel in Prince George’s County are examples of regional growth centers in the Maryland suburbs. The continued linkage of the Baltimore-Washington Corridor as a primary population area should have a significant impact on the economy of the Washington area in the future.

The Washington metropolitan area is a strategic location given its status as the seat of the federal government and the massive federal bureaucracy. Movement and growth of the government affects employment of government workers and workers in other industries, particularly the service industries. The economic downturn of the early 1990’s had a short-term negative effect on the Washington area economy. Employment loss abated and many new economic developments have since been completed. The population of the region and its housing growth has continued, especially in the far-reaching Maryland and Virginia suburbs, although Washington, DC itself experienced population loss. Long-term economic prospects are still considered good.



RIVERSIDE PARK APARTMENTS		11

FAIRFAX COUNTY DATA

A well-developed highway network permitting access to the major urban centers of the northeast corridor serves Fairfax County and the surrounding area. Interstate 66 crosses in an east-to-west direction connecting west into Manassas and Prince William County and to the east into the Washington Capital Beltway and into Downtown Washington, DC. Route 267 (Dulles Toll Road) provides access east to the Capital Beltway and west into Loudoun County and the Dulles International Airport. The Capital Beltway connects Washington with the Baltimore area to the north and Richmond to the south. Air travel is convenient as well. Dulles International Airport connects Fairfax County with major cities worldwide.

Despite the fact that there are more than 50 square miles of parkland, much of Fairfax County has been developed for residential and commercial purposes. High-density development in Fairfax County has been focused around the areas closest to Arlington County, Alexandria and Washington, DC. There has also been significant residential development along the Route 66/Route 50 Corridor as far west as Centreville. Fairfax County has a large and diversified industry base. The county is home to six Fortune 500 company headquarters: Capital One Financial, Gannett Corporation, General Dynamics, Nextel, NVR and Sallie Mae. Along with its strength in government and defense technology, the county has a large and growing number of commercial IT, financial, software, communications and technology management service providers. In addition to being a major employment center, Fairfax County is also home to a number of educational institutions including George Mason University, University of Virginia and Virginia Tech.

Population

The following population statistics demonstrate the changes that have taken place in Fairfax County and adjacent Arlington County and Alexandria City since 1980, and include a 2011 projection.

Fairfax, Arlington, and Alexandria
Population 1980-2011

Sources: U.S. Census Bureau & Claritas, Inc.

Population growth in Fairfax County has out-paced that of Arlington and Alexandria. This is due to the availability of vacant land in outlying areas of western and northern Fairfax County.



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Unemployment rates are derived from a U.S. Department of Labor household survey which measures the number of individuals receiving unemployment benefits that are actively seeking employment. The unemployment rate for Fairfax County decreased from 2.5% in March 2005 to 2.2% in March 2006. Similarly, the Arlington County unemployment rate decreased from 2.5% to 2.1% and the Alexandria City unemployment rate decreased from 2.9% to 2.4% during the same period.

Fairfax, Arlington, and Alexandria
Unemployment Rates 1996-2005

Source: U.S. Department of Labor, Bureau of Labor Statistics

The low unemployment rate in the County of Fairfax is attributed to the large concentration of employment opportunities within the county and in the surrounding areas. Dulles International Airport, various business and industrial parks scattered throughout the county and the large number of potential employers in McLean, Tysons Corner, Fair Lakes, Vienna, Fairfax and other sites throughout the county provide ample employment opportunities for tenants of the subject property. Fairfax County is home to over 29,000 businesses and over 580,000 employed residents. As noted earlier, Fairfax County also has a large number of technology-based companies. International businesses also have a strong presence in the county. The area has strong ties to the federal government and government-related employment which will provide a strong employment based into the future.



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Following is a list of the top private sector employers in Fairfax County.


Employer	Industry	Employees
Inova Health System	Health Care	10,000 +
Northrop Grumman IT	Professional, Scientific, Technical Services	5,000-9,999
Booz Allen Hamilton	Professional, Scientific, Technical Services	5,000-9,999
SAIC	Professional, Scientific, Technical Services	5,000-9,999
Freddie Mac	Finance and Insurance	3,000-4,999
Computer Sciences Corp.	Professional, Scientific, Technical Services	3,000-4,999
Lockheed Martin	Professional, Scientific, Technical Services	3,000-4,999
Sprint Nextel	Information, Telecommunications	3,000-4,999
General Dynamics	Professional, Scientific, Technical, Manufacturing	2,000 – 2,999
Raytheon	Professional, Scientific, Technical Services	2,000 – 2,999
ExxonMobil	Wholesale Trade (Petroleum Products)	2,000 – 2,999
Navy Federal Credit Union	Finance and Insurance	2,000 – 2,999
IBM	Professional, Scientific, Technical, Computers	2,000 – 2,999
Accenture	Professional, Scientific, Technical Services	2,000 – 2,999
BAE Systems	Professional, Scientific, Technical, Transportation	2,000 – 2,999
Gannett Co.	Information, Newspapers	2,000 – 2,999
Verizon	Professional, Scientific, Technical, Telecom	2,000 – 2,999
The MITRE Corporation	Professional, Scientific, Technical Services	2,000 – 2,999

Source: Fairfax County Economic Development Authority, May 2006

Many technology and telecommunications companies have located in Northern Virginia, especially Tysons Corner/Dulles/and farther westward along Route 7 on the way to Leesburg. This Internet hub has resulted in a large number of skilled workers attracted into the area which has ramped up housing demand and rent levels. The decline in the technology center in the early 1990’s resulted in numerous layoffs at local companies in Western Fairfax and Eastern Loudoun Counties. Since then, a recovery has occurred as other firms have established themselves in these areas.

Fairfax County as a whole included 229,524,736 SF of non-residential space in 2004 consisting of 41,150,059 SF of industrial space, 103,520,646 SF of office space, 33,857,377 SF of retail space and 37,698,795 SF of institutional space. Employment in Fairfax County is dominated by the service sector which employs nearly 45% of the entire workforce. Federal, state and local governments account for 12% of Fairfax County’s workforce.

RIVERSIDE PARK APARTMENTS

NEIGHBORHOOD DESCRIPTION

The subject is located east of Richmond Highway (Route 1) and north of Huntington Avenue in an unincorporated area of Fairfax County just south of the City of Alexandria. Cameron Run, a tidal creek, separates the subject’s location in Fairfax County from the City of Alexandria. Interchange 1 of the Capital Beltway, also known as Interstate 95, is within one half mile of the subject. The subject has excellent access to Alexandria, the Pentagon, downtown Washington, DC and the surrounding suburbs. Uses in the subject’s immediate neighborhood include Huntington Gateway (Rental #1) to the south, a high-rise condominium project to the southwest, commercial buildings to the east, a car dealership adjacent to the east, single-family detached dwellings adjacent to the west, and townhouses to the southwest and southeast. The subject consists of one large site bounded by Cameron Run Terrace and Old Richmond Highway to the east, Cameron Run to the north, single family homes to the west, and Huntington Avenue to the south. Huntington Avenue connects with Richmond Highway to the east and with Telegraph Road (Route 611) to the west. Huntington Park is located west of the subject along the banks of Cameron Run. The Huntington Metro Station is located about 1/2 mile west of the subject just south of Huntington Avenue with a parking area adjacent to the station.

The City of Alexandria is located one-half mile north of the subject. Significant development has occurred and is occurring along the Eisenhower Corridor just north of the subject in Alexandria including the Carlyle area less than one mile north of the subject. Major projects include the Patent and Trademark office development with 2.5 million square feet of office space and the proposed Hoffman Center with nearly 4 million square feet of office space planned. A new Woodrow Wilson Bridge crossing the Potomac River one mile east of the subject and connecting Alexandria with Prince George’s County is currently under construction. The completion of this bridge will allow for easier access to Maryland and the District of Columbia. Two of the former Hunting Towers buildings, (now known as Hunting Point on the Potomac — Rental #3), five Hunting Terrace Buildings and two nearby office buildings were demolished to allow for construction of the new bridge, which is planned for completion in 2007. The subject’s U.S. Route 1/Interstate 95/495 Interchange will see construction and improvements over the next few years as part of the construction of the new bridge. The new bridge and upgraded Capital Beltway are expected to have a positive effect on the subject’s area as access across the Potomac River into Maryland and the District is improved.

As noted previously, the subject property is located in an unincorporated area of Fairfax County and has an Alexandria mailing address. This is a suburban Washington, D.C. area with convenient access to major employment centers, schools, recreational facilities and community shopping centers. Nearby uses include elevator apartment and condominium projects, commercial shopping centers, single family detached dwellings, office buildings and the Belle Haven Country Club. The subject is within close proximity to Penn Daw Plaza, Builders Square Plaza and Beacon Mall all of which are located south of the subject within 1 to 2 miles. Old Town Alexandria with its attractive employment, entertainment, retail and recreational amenities and rich historic significance lies just one mile north of the subject.

RIVERSIDE PARK APARTMENTS

In conclusion, the subject possesses a desirable suburban Washington, D.C. location in the Mount Vernon Planning District of Fairfax County, Virginia. Proximity to the City of Alexandria and the Capital Beltway to the north accords the subject a convenient semi-urban appeal. The numerous employment opportunities in this area should attract potential tenants desiring to live in close proximity to their place of employment. The subject appeals to middle to upper middle income workers desiring rental housing with good accessibility to shopping, schools, employment centers and major roads. It is expected that the subject’s area will continue to generate adequate economic demand to support the subject as an elevator apartment rental project.

RENTAL MARKET ANALYSIS

The appraiser considered numerous market rate rental projects in the Washington, DC market. The subject’s rental market has been characterized by increasing rents and stable occupancy levels. The overall reported vacancy rate among the fourteen comparables surveyed and reporting vacancy data was 2.9%. The following table summarizes the rent comparables utilized in this appraisal.

Summary of Comparable Rentals


	*Project Name*	*# Units*		*Yr Blt*		*# Vac*		*Vac Rate*			*Studio Rent*		*1BR Rent*		*2BR Rent*		*Utilities Included*

1	Huntington Gateway		443		1990		7		1.6	%	$	1,145-$1,390	$	1,140-$1,625	$	1,540-$1,930	Cold water

2	Belle Haven Towers		569		1964-73		9		1.6	%	$	829-$950	$	960-$1,157	$	1,186-$1,415	Varies

3	Hunting Point on the Potomac		530		1948		60		11.3	%	$	869-$941	$	1,054-$1,190	$	1,400-$1,473	All

4	Carydale East		233		1965		5		2.1	%	$	760-$848	$	928-$1,059	$	1,238-$1,389	All

5	Meridian at Carlyle		403		2001		4		1.0	%	$	1,230-$1,630	$	1,475-$1,865	$	1,930-$2,430	None

6	The Reserve at Eisenhower		250		2001		5		2.0	%		–	$	1,450-$1,970	$	1,785-$1,935	None

7	Meridian at Braddock Station		480		1991-2002		4		0.8	%	$	1,195	$	1,285-$1,365	$	1,675-$1,830	None

8	The Summit		142		1980		2		1.4	%		–	$	1,335-$1,454	$	1,631-$1,795	All

9	3001 Park Center		326		1989		4		1.2	%		–	$	1,065-$1,585	$	1,585-$2,130	None

10	London Park Towers		458		1963		15		3.3	%	$	896-$1,010	$	1,056-$1,207	$	1,465-$1,552	All

11	Southern Towers		2,293		1964		8		0.3	%	$	775-$860	$	945-$1,020	$	1,250-$1,395	All

12	Eos 21 Apartments		1,200		1963-67		98		8.2	%	$	930	$	1,100-$1,150	$	1,420-$1,465	Ht., ckg., electricity

13	Cascade at Landmark		227		1990		6		2.6	%		–	$	1,212-$1,650	$	1,495-$1,766	None

14	Carlyle Mill		317		2002		4		1.3	%		–	$	1,585-$1,900	$	1,830-$2,400	None

	Market Totals/Averages		7,871				231		2.9	%	$	760-$1,630	$	928-$1,900	$	1,186-$2,430

Subject: Riverside Park (5/06)			1,222		1968-70		252		20.6	%	$780-$895 est.		$990 est.		$1,290 est.		None (RUBS)

An analysis was completed using data from Rentals #1, #2, #3, #4, #10 and #11 comparing the average rent levels in February 1996 for studio, 1BR and 2BR units to the average rent levels for the same unit sizes in May 2006. The average studio rents increased 60.5% or 4.6% per year from $557 to $894. The average 1BR rents increased 51.8% or 4.1% per year from $701 to $1,064. The increase in 2BR rents was 57.4% or 4.4% per year from $884 to $1,392. The vacancy level measured among the 4,526 units used in this analysis was unchanged at 2.3%.

RIVERSIDE PARK APARTMENTS

Increased economic development and rising incomes fueled rapid rental increases in the Fairfax County rental market between 1998 and January 2001. Rents appear to have peaked in early 2001. According to the Fairfax County 2005 Rental Housing Complex Census Analysis, the annual average monthly rent in Fairfax County since 1990 was as follows:

Fairfax County Annual Rent Growth


Year	Avg Rent		% Change			Year			Avg Rent		% Change
1991	$	747		1.8	%		1998		$	849		6.1	%
1992	$	739		-1.1	%		2000	*	$	989		16.5	%
1993	$	753		1.9	%		2001		$	1,129		14.2	%
1994	$	767		1.9	%		2002		$	1,157		2.5	%
1995	$	792		3.3	%		2003		$	1,168		1.0	%
1996	$	800		1.0	%		2004		$	1,157		-0.9	%
1997	$	809		4.3	%		2005		$	1,202		*	*


*		2000 % Change Reflects Rent Growth for Two Years

**		Due to a change in methodology, the percent change from the prior year is not comparable.

Source: Fairfax County 2005 Rental Housing Complex Census Analysis

The following table displays average monthly rent by planning district. The average rent in the subject’s Mount Vernon Planning District is $1,006, the lowest average rent for any planning district.

Fairfax County Average Monthly Rent by Planning District


Planning District	2005
Annandale	$	1,192
Baileys	$	1,113
Bull Run	$	1,197
Fairfax	$	1,295
Jefferson	$	1,156
Lincolnia	$	1,141
Lower Potomac	$	1,016
McLean	$	1,445
Mount Vernon	$	1,006
Pohick	$	1,309
Rose Hill	$	1,368
Springfield	$	1,168
Upper Potomac	$	1,296
Vienna	$	1,276
Fairfax County Totals	$	1,202

Source: Fairfax County 2005 Rental Housing Complex Census Analysis

The average rent for low-rise units was $1,183 compared to $1,218 for mid-rise units, $1,232 for high-rise units and $1,516 for townhouse units. Low-rise units include projects with apartment buildings 4 stories or less and may be garden or elevator projects.

RIVERSIDE PARK APARTMENTS

The following table summarizes 2005 vacancy rates for each Fairfax County Planning District. The subject’s Mount Vernon Planning District had a 6.5% vacancy rate in January 2005 as indicated below.

Fairfax County Vacancy Rates By Planning District


Planning District	Units Surveyed		Vacancy Rate
Annandale		3,873		4.5	%
Baileys		5,522		4.7	%
Bull Run		6,505		5.7	%
Fairfax		6,877		10.1	%
Jefferson		5,613		6.2	%
Lincolnia		2,448		6.4	%
Lower Potomac		1,474		6.2	%
McLean		3,014		5.0	%
Mount Vernon		9,910		6.5	%
Pohick		954		2.0	%
Rose Hill		2,612		4.0	%
Springfield		1,730		3.3	%
Upper Potomac		11,647		9.9	%
Vienna		2,445		2.2	%
Fairfax County Totals		64,624		6.8	%

Source: Fairfax County 2005 Rental Housing Complex Census Analysis

According to the 2005 Fairfax County Rental Housing Complex Census Analysis, the Fairfax County vacancy rate was 6.8% in 2005 up slightly from 5.6% in 2004. The countywide vacancy rate was 2.5% in 2001, 1.6% in 2000, 5.5% in 1998, 5.0% in 1997 and 5.4% in 1996. The countywide vacancy rate fluctuated between 4.7% and 6.2% between 1992 and 1995.

An analysis of vacancy rate by unit type reveals that the average annual vacancy rate during 2005 for Efficiency, 1BR and 2BR units was 3.7%, 6.9% and 6.5%, respectively. Vacancy rates by type of structure are illustrated in the following table:

Fairfax County Vacancy Rates By Structure Type


Structure Type	Units		Vacancy Rate
Low-Rise		51,315		7.0	%
Mid-Rise		5,084		5.3	%
High-Rise		4,668		5.5	%
Townhouse		3,557		6.4	%
TOTAL		64,624		6.8	%

Source: Fairfax County 2005 Rental Housing Complex Census Analysis

As indicated in the above table, 79.4% of rental units in Fairfax County are low-rise units while mid-rise units comprise 7.9%, high-rise units 7.2% and rental townhouse units 5.5% of the total.

RIVERSIDE PARK APARTMENTS

The Delta Associates Year First Quarter 2006 Class A Apartment Market Report reported a vacancy rate of 2.3% at stabilized Class A rental properties in Northern Virginia in March 2006. The combined Northern Virginia Class A and Class B vacancy rate at projects no longer in initial lease-up remained constant at 2.2% between March 2005 and March 2006. Delta indicated an increase of 5.1% in the average effective rent for all stabilized Class A and Class B properties in Northern Virginia between March 2005 and March 2006.

A total of 20,365 multifamily building permits were issued in Fairfax County between 1998 and 2005 for an average of 2,546 per year during that period. Arlington County and the City of Alexandria have seen less multifamily development than Fairfax County because of their more built-up conditions. The following table shows the number of multifamily building permits issued in Fairfax County, Arlington County and the City of Alexandria between 1998 and 2005.

Multifamily Building Permits 1998-2005


Area	1998		1999		2000		2001		2002		2003		2004		2005
Fairfax		2,708		3,272		1,998		2,623		2,991		880		3,816		2,077
Arlington		342		827		730		749		0		0		0		1,097
Alexandria		584		414		714		928		864		52		672		820

Source: U.S. Census Bureau

The following table summarizes the number of units by planning district in Fairfax County. The subject’s Mount Vernon Planning District has 15.3% of the County’s units. Previous reports did not include the publicly-owned complex units. The elimination of the 2,020 publicly-owned units included in the 2005 Report reveals a decrease of 330 units between January 2004 and January 2005.

Fairfax County Rental Units By Planning District, January 2005


Planning District	2005
Annandale		3,873
Baileys		5,522
Bull Run		6,505
Fairfax		6,877
Jefferson		5,613
Lincolnia		2,448
Lower Potomac		1,474
McLean		3,014
Mount Vernon		9,910
Pohick		954
Rose Hill		2,612
Springfield		1,730
Upper Potomac		11,647
Vienna		2,445
Fairfax County Totals		64,624

Source: Fairfax County 2005 Rental Housing Complex Census Analysis



RIVERSIDE PARK APARTMENTS		24

Northern Virginia Multifamily Pipeline


Project Name	Location	Status	Units in Pipeline
Under Construction/Lease-up
Camden Fairfax Corner	Fairfax	Lease-up		326
Meridian at Eisenhower	Alexandria	U/C		369
Camden Monument Place	Fairfax	U/C		350
Metropolitan Reston Apartments	Reston	U/C		288
Jefferson at Sullivan Place	Springfield	U/C		498
Camden Potomac Yard	Arlington	U/C		378
Airport Plaza Phase III	Crystal City	U/C		412
Liberty Center	Ballston	U/C		235
One Metropolitan Park — Phase I	Pentagon City	U/C		399
Rosslyn Towers	Rosslyn	U/C		224
Bailey’s	Shirlington	U/C		244
Quincy Plaza	VA Square	U/C		474
Carlyle — Phase I	Alexandria	U/C		224
Columbus Mews	Alexandria	U/C		75
Northampton Place — Phase II	Alexandria	U/C		275

Total Under Construction/Lease-up				4,771

Projects Planned w/in 3 Years
Skyline Area (Bailey’s)	Alex/Arl/Fairfax	Planned		385
Views of Clarendon	Clarendon	Planned		46
Two Metropolitan Park — Phase II-VIII	Pentagon City	Planned		300
North Tract Lofts	Crystal City	Planned		190
Rosslyn Ridge	Rosslyn	Planned		142

Total Planned w/in 3 Years				1,063

Three Year Pipeline Total				5,834

Longer Term Pipeline (3+ Years)
Carlyle — Phase II	Alexandria	Longer Term		175
Jefferson at Kings Crossing	Alexandria	Longer Term		543
TBA	Alexandria	Longer Term		200
Huntington Metro Station	Alexandria	Longer Term		180
TBA	Clarendon	Longer Term		265
Central Place	Rosslyn	Longer Term		350
Clarendon Center	Clarendon	Longer Term		279
Three Metropolitan Park	Pentagon City	Longer Term		410
Four Metropolitan Park	Pentagon City	Longer Term		348
Five Metropolitan Park	Pentagon City	Longer Term		386
Six Metropolitan Park	Pentagon City	Longer Term		520
Seven Metropolitan Park	Pentagon City	Longer Term		395
Eight Metropolitan Park	Pentagon City	Longer Term		455
Dulles Station — Building H and J	Reston	Longer Term		368
Munson Hill Towers Redevelopment	Falls Church	Longer Term		200
TBA	Fairfax	Longer Term		500
Merrifield Town Center	Merrifield	Longer Term		925
Arrowbrook Centre	Centerville	Longer Term		800

Total Longer Term (3+ Years)				7,299

Total Pipeline				13,133



RIVERSIDE PARK APARTMENTS		26

Absorption rates of recently built apartment projects in Fairfax County, Arlington County and Alexandria were researched as indicators of demand for newly built apartments. The chart below is a summary of the absorption history at a number of rental apartment projects in Fairfax County that have been developed over the past several years.

Northern Virginia Absorption


Project	Location	Total Units		Year Built		Monthly Absorption Rate
The Clarendon (High-Rise)	Arlington		160		2005		12
Camden Fairfax Corner*	Fairfax		488		2005		22
Lofts 590	Arlington		202		2005		14
The Metropolitan at Pentagon Row	Arlington		326		2004		22
The Clarendon (Midrise)	Arlington		132		2004		12
Metropolitan at Fairfax	Herndon		223		2004		25
Metropolitan at Arlington	Arlington		183		2003		14
Gallery at Rosslyn	Rosslyn		276		2003		18
The Reserve at Clarendon Centre	Clarendon		252		2003		23
Van Metre Woodland Park — Phase II	Herndon		252		2003		25
Meridian at Braddock Station II	Alexandria		297		2002		21
Reserve at Eisenhower	Alexandria		226		2002		10
Metropolitan at Alexandria	Alexandria		404		2002		11
Archstone Van Dorn	Alexandria		296		2002		24
Jefferson at Carlyle Mill	Alexandria		315		2002		18
Warwick House Phase II	Crystal City		212		2002		12
Meridian at Courthouse Commons III	Courthouse		292		2002		23
Gallery at Virginia Square	Virginia Square		230		2002		21
Residences at Market Common	Clarendon		300		2002		23
Metropolitan at Pentagon City I	Pentagon City		325		2002		21
The Atherton	Ballston		123		2002		15
Avalon at Arlington Square II	Arlington		309		2002		13
Reserve at Potomac Yard	Alexandria		588		2001		40
Esplanade at Park Center	Alexandria		392		2001		30
Meridian at Carlyle	Alexandria		403		2001		37
Pentagon Row	Pentagon City		504		2001		24
Ballston Place	Ballston		383		2001		33
Avalon at Arlington Square I	Arna Valley		510		2001		40
Millbrook at Mark Center Phase I	Alexandria		272		2000		13
2201 Wilson Boulevard	Courthouse		219		2000		37
Average Absorption Rate							22


*		In lease-up phase



RIVERSIDE PARK APARTMENTS		27

THE SUBJECT PROPERTY

Property Identification

Riverside Park Apartments
2000 Huntington Avenue, Alexandria (outside)
Fairfax County, VA 22303

Tax Account Number

0833 01 0101

Census Tract

4204.00

Property History

The subject is currently in title to AIMCO Riverside Park LLC. No sale of the subject has occurred within the last five years according to tax data obtained from Win2Data for Fairfax County, VA. Fairfax County tax assessment data indicates a transfer of the subject in June 2000 for $0 in consideration. This transfer may have involved an ownership name change or some other non arms-length transaction. The last arms length sale of the subject appears to have occurred in July 1986 when the subject reportedly sold for $59,125,000. According to the subject’s management, the property is not currently under an agreement of sale nor is the subject listed for sale.

Assessment and Real Estate Tax Data

Real estate taxes are based upon the Fairfax County Assessor’s estimate of market value (703-222-8234). Properties are reassessed annually with the assessed values set at 100% of fair market value. Assessments are established on a calendar year basis. Tax rates are set between April and June of each year and are applied to the assessment which is in effect on the preceding January 1. The subject’s 2006 assessment will be utilized by Fairfax County to calculate the subject’s tax liability for the current calendar year. The current assessment, rates and taxes are reported below. The following Map Reference Number identifies the subject’s parcel: 0833-01-0101. The 2006 county tax rate is $0.89 per $100 of assessed value. In addition, the subject’s rate includes $.001 per $100 of assessed value as a Gypsy Moth Control tax. The overall tax rate for the subject is $0.90.

Real estate tax assessments have been increasing for the subject between 2003 and 2006 and have also been rising since 2000. Over the 2003 through 2006 period, the tax rate has declined from $1.161 in 2003 to $1.131 in 2004 to $1.001 in 2005 to $0.90 in 2006. Thus, as assessments have been increasing for the majority of properties, the tax rate for Fairfax County has been adjusted downward to lessen the impact of these higher assessments. The subject’s real estate tax expense actually decreased in 2005 and 2006.



RIVERSIDE PARK APARTMENTS		28

The subject’s parcel is currently assessed at $90,090,900 or $73,724 per unit. Since the assessed value differs from the value appraised herein, a check of the reasonableness of the subject’s assessment has been made. The following apartment projects from the subject’s sub-market were researched for tax assessment information. These comparables represent a wide array of assessments that bracket the subject’s current assessment and proposed assessment.

Real Estate Tax Assessment Comparables


					Assessment
#	Project Name	Year Built	# Units		Per Unit
1	Munson Hill	1963		279	$	65,442
2	Fairfax Towers	1977		415	$	97,045
3	Belle Haven Towers	1964/73		569	$	85,275
4	Ravenwood Towers	1962		310	$	98,247
Subject	Riverside Park (2006)	1968-70		1222	$	73,724

Subject	Riverside Park (estimated)	1968-70		1222	$	92,155

The appraiser also researched recent Fairfax County sales to determine the increase in assessment subsequent to sale. Ravenwood Towers which sold in August 2004 for $32,670,000 saw its assessment increase by 24% to $28,282,660 in 2005. Skyline Towers, which sold for a recorded price of $165,500,000 in December 2005, saw its assessment increase 30.6% to $74,260,000 for 2006. The subject’s assessment for purposes of this appraisal is estimated at 25% above the current assessment rounded to $112,614,000 or $92,155 per unit since an appraisal assumes a sale of the subject property. If the subject were sold at the value appraised herein, it is likely that in the tax year following the sale (2007) the assessment would be adjusted to a level more closely reflecting the recorded sales price.

The following table summarizes the subject’s current, historical and projected real estate tax assessments and expenses.


Real Estate Tax Calculations	2003		2004			2005			2006			2007 (Projected)
Land Assessment	$	28,106,000	$	34,216,000		$	36,660,000		$	73,320,000
Improvement Assessment	$	42,067,215	$	47,125,455		$	49,390,800		$	16,770,900

Total Assessment	$	70,173,215	$	81,341,455		$	86,050,800		$	90,090,900		$	112,614,000
Indicated Assessment Increase		—		15.9	%		5.8	%		4.7	%		25.0	%

Current Real Estate Tax Rate		1.161		1.131			1.001			0.900			0.900

Indicated Real Estate Tax Expense	$	814,711	$	919,972		$	861,369		$	810,818		$	1,013,526
Rounded	$	814,700	$	920,000		$	861,400		$	810,800		$	1,013,500
Real Estate Tax Expense/Unit	$	667	$	753		$	705		$	664		$	829

Indicated Increase		—		12.9	%		-6.4	%		-5.9	%		25.0%



RIVERSIDE PARK APARTMENTS		29

The subject’s 2006 assessment of $90,090,900 will be in effect through December 31, 2006 or for approximately six months of the 12-month projection period. The subject’s assessment is projected by the appraiser to increase to $112,614,000 for the January 1, 2007-December 31, 2007 period which includes the remaining six months of the subject’s 12-month projection period assuming a sale of the subject. In estimating the subject’s real estate tax expense for the 12-month projection period, a blended assessment including the current assessment for the first six months and the projected 2007 assessment for the final six months has been utilized. The following table displays the subject’s projected real estate tax expense assuming stable tax rates.


Annual Real Estate Tax Expense 2006	$	810,800
Monthly Real Estate Tax Expense 2006	$	67,567
Number of Months in Projection		6

First Portion of Real Estate Tax Projection			$	405,402
Annual Real Estate Tax Expense 2007	$	1,013,500
Projected Monthly Real Estate Tax in 2007	$	84,458
Number of Months in Projection		6

Second Portion of Real Estate Tax Projection			$	506,748
Weighted Average Real Estate Tax Expense			$	912,150
	Rounded		$	912,200

If the subject’s assessment were increased 25% to $112,614,000 in 2007, a rent increase of about $14 per month would be required to offset the increased real estate tax expense.

Site Data

The subject consists of one parcel located south of Cameron Run (a tidal creek), west of Route 1 and north of Huntington Avenue. The subject site is irregularly shaped and contains 28.1713 acres. Site topography is primarily level but gently slopes to the north. Access is direct to the site from the east side of Old Richmond Highway and the north side of Huntington Avenue, both of which are easily accessible from Route 1 and Richmond Highway.

The subject has a total of 1,804 open on-site parking spaces according to a count provided by the subject’s community manager. The parking space total includes about 28 handicapped spaces and 40 motorcycle spaces. The subject’s parking areas are scattered throughout the site in and around the subject’s three 15-story towers. The subject’s parking ratio of 1.5 spaces per unit is considered adequate for this market. Ingress and egress from two driveway entrances is considered safe and adequate.

In addition to the subject’s apartment buildings, the subject site is improved with concrete sidewalks and walkways leading to the building entrances. The subject’s driveways and parking areas are asphalt and are in average overall condition. Exterior lighting for the parking areas is considered adequate. Each of the subject’s three buildings has its own swimming pool. A fitness center is located in Building II and an aerobics room is located in Building III. Additionally, tennis courts, a volleyball/basketball court and a picnic area are on the subject site. The subject has three commercial tenants, one of which is located in Building I and two are located in Building II. Commercial tenants include a dentist, a convenience-type store and a dry cleaner.



RIVERSIDE PARK APARTMENTS		30

Landscaping consists of trees, grass and plantings that appear to be well-maintained. Concrete sidewalks and asphalt driveways and parking areas are in overall average condition. The subject site is located in 3 different flood zones; C, A and AE. Flood insurance is typically required for properties located in Zones A and AE. Flood insurance is not required for properties in a Zone C flood area. See the attached Flood Plain Map illustrating the subject’s location relative to flood areas. It is assumed that the subject property carries flood insurance if required. All typical utilities are available to the subject including sewer, water, gas, electricity, telephone and cable. Typical utility easements traverse the subject site.

The subject’s parcel is physically suited for its current use as a 1,222 unit rental apartment project with ancillary commercial uses. The site improvements are rated in average overall condition.

Improvement Data

The subject is improved with three 15-story elevator-served rental apartment buildings constructed between 1968 and 1970 with a total of 1,222 residential apartment units. In addition to the rental apartments, the subject has 7 commercial spaces of which 3 are currently occupied. There are no plans to lease the vacant four commercial spaces. Each of the subject’s buildings has a central laundry room equipped with contractor owned and operated laundry equipment. The rental office is located in Building I which is the first building after entering the subject from the north side of Huntington Avenue. The subject property is maintained in overall average condition. The subject was partially renovated in the 1980’s with upgraded kitchens, etc. All of the subject’s balconies underwent restoration in recent years to restore them to good condition. According to the available operating statements for the subject, about $1.5 million in capital improvements were completed at the subject between January 2002 and April 2006. In addition, carpet and appliance replacements have been ongoing. Following is a summary of the subject’s unit mix and unit sizes. The unit sizes were obtained from measurements taken by the undersigned during prior inspections of the subject. The subject has a variety of floor plans.


									Sq. ft.
No. of	Unit Rm. Count						Total		Area		Net Rentable
Units	Tot.		BR		b		Rooms		Per Unit		Area
14		2.0		E		1		28		289		4,046
140		2.0		E		1		280		500		70,000
70		2.0		E		1		140		550		38,500
741		3.5		1		1		2594		820		607,620
257		4.5		2		2		1157		1134		291,438
1222	TOTAL							4198				1,011,604



RIVERSIDE PARK APARTMENTS		31

Summary of Construction Components


Foundation		Masonry

Structural System		Reinforced concrete

Exterior Walls		Brick

Roof		Flat rubber roof

Interior Walls		Painted sheetrock

Floor Coverings		Carpeting over hardwood floors in living areas. Ceramic tile flooring and wainscot in bathrooms. Vinyl tile flooring in kitchen.

Heating		Individual electric heat pump or resistance fan coil units. Tenants are responsible for electricity usage for heat.

Cooling		Individual electric heat pump or unit chillers. Tenants are responsible for electricity usage for cooling.

Hot Water		Central gas-fired domestic hot water heaters

Elevator		Twelve passenger elevators

Plumbing Fixtures		Stainless steel kitchen sink. Tub with shower and ceramic tile surround, sink and toilet.

Kitchen Features		Wood cabinetry and plastic-laminate countertops. Cabinets exhibit a variety of styles depending on replacement style at the time of unit renovation. Four-burner electric range, refrigerators, garbage disposals and microwave ovens in all units. Dishwashers in 1BR and 2BR units.

Utilities		The subject’s residents are billed for their utility usage under a Ratio Utility Billing System (RUBS). The RUBS program at the subject charges tenants for their use of electricity, water and sewer usage and trash removal. The subject started billing tenants for trash removal in 2005.

Amenities		Each building has a swimming pool and there are six tennis courts on the site. Other facilities include a fitness center in Building II and an aerobics room in Building III. A volleyball/basketball court is located on site along with a picnic area.

Laundry		Each of the three buildings has a common laundry room with coin- operated equipment that is contractor owned and operated.




RIVERSIDE PARK APARTMENTS		32

Summary of Construction Components (continued)


Security/Fire Safety		Gated entrance with watchman, fire alarms, back-up gas generator, smoke detectors, emergency lighting

Condition		The subject’s improvements in “As Is” condition prior to renovation are rated in overall average condition with repairs and replacements made as necessary. Some window ledges were in need of repair.

A substantial renovation of the subject is in process. Building #1 with 366 units will be the first building to be renovated with a contract construction cost of $20,100,000 or $54,918 per unit. Projected costs for the remaining two buildings were not available. This valuation has estimated the subject’s “As Is” market value prior to renovation in accordance with the client’s request.

The subject is estimated to have an effective age of 20 years and an estimated remaining economic life of 35 years.

Planned Renovations

The subject’s ownership plans to extensively renovate the subject property. Building #1 with 366 units will be the first building to be renovated with a contract construction cost of $20,100,000 or $54,918 per unit. Projected costs for the remaining two buildings were not available. The planned renovations will increase the project size slightly from the current 1,222 units to 1,229 units and reposition the subject from its current Class C status to a Class B+ project (Class B project with Class A amenities). A new 10,000 square foot free-standing athletic facility/clubhouse leasing center will be built on the site adjacent to Building II. The subject’s 14^th and 15^th floors will be upgraded with Class A features while 1^st through 13^th floors will be renovated to Class B standards. Washers and dryers will be installed in each unit as part of the rehab plan. The subject’s kitchens will be “opened-up” to the living room creating a more open, contemporary floor plan. Appliances will be replaced in all units, new counter tops will be installed, internet wiring will be run to each unit and kitchen cabinets and flooring will be replaced. The subject’s windows are planned for replacement, new sliding glass doors will be installed in each unit with a balcony, the roofs will be replaced, the heat pumps will be replaced along with many other property upgrades. These renovations will re-position the subject property in the market and enhance the subject’s overall income potential. Renovation construction began in June 2006 with initial occupancy of renovated units in September 2006. The owner anticipates delivering approximately 20 renovated units per month.

This valuation has estimated the market value of the subject property assuming habitable condition prior to renovation in accordance with the client’s request. Stabilized occupancy is assumed although the vacancy rate is elevated due to the renovation.



RIVERSIDE PARK APARTMENTS		33

Zoning Discussion

The subject is under the zoning jurisdiction of Fairfax County. Land use is regulated by the Zoning Ordinance of Fairfax County (Office of Zoning, 703-385-7820) adopted June 12, 1978 and effective August 14, 1978. The subject is located in an R-30 Residential District. The R-30 District is established to provide for multiple family dwellings at a density not to exceed 30 dwelling units per acre; to provide affordable dwelling unit developments at a density not to exceed 36 dwelling units per acre; and to allow other selected uses which are compatible with the residential character of the district. Permitted uses in the R-30 District include: affordable dwelling unit developments, churches, chapels, temples, etc.; multiple family dwellings; and public uses. Special permit uses include: institutional uses; community uses; commercial recreation uses; and outdoor recreation uses.

The subject is located in Fairfax County in the R-30 Residential District which was established to provide for multi-family dwellings. The following is an analysis of major requirements of the zoning ordinance as compared to the subject’s existing development. This comparison is based on information supplied by the owner and obtained from public records and site inspection by the appraiser.


Requirement	Zoning Code	Subject
Minimum Lot Area	3 acres	28.1713 acres
Maximum Density (Dwelling Units/Acre)	30 units/acre	43.4 units/acre
Maximum Height Permitted	150 feet	150+/- feet
Parking Requirements (1.6 Spaces/Unit)	1,966	1,804

Section 15-101 of the Fairfax County Zoning Ordinance states:

“Notwithstanding the definition of nonconforming building or use presented in Article 20, a building or use shall not be deemed a nonconforming use if such was a conforming building or use prior to the effective date of this Ordinance, and such building or use would otherwise be a conforming use under the provisions of this Ordinance except that it does not meet the minimum district or lot size or minimum yard requirements of the zoning district in which located.”

In other words, since the subject’s density was permitted at the time of original construction, i.e. lot size was sufficient, the subject’s building density does not technically render the property as nonconforming. The subject’s parking provides less than that required by the current ordinance, therefore the subject is considered to be a legal nonconforming use.

Section 15-103 of the current ordinance addresses the issue of the damage of a nonconforming structure. Under the current ordinance an existing building may be restored if it is damaged to a degree not exceeding 50% of its current appraised value. Since parking relates to the subject as a whole, this 50% would apply to the total project value of the subject’s buildings less foundation costs. The maximum time period for restoration is two years.



RIVERSIDE PARK APARTMENTS		34

Many properties like the subject in this market are legally non-conforming due to changes in the zoning ordinance. This condition does not have a significant impact on the subject’s value or marketability. If the site were vacant, buildings of the same height as the subject (approximately 150 feet) could be constructed; however, they would be limited by the lot size of 28.1713 acres to a maximum yield of 845 units requiring 1,352 parking spaces.

HIGHEST AND BEST USE

Highest and best use may be defined as the reasonably probable and legal use of vacant land or improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value. Among all reasonable, alternative uses, the use that yields the highest present land value, after payments are made for labor, capital, and coordination, is generally regarded as the highest and best use of the land as though vacant. Analysis of the highest and the best use of a property as improved implies that the existing improvements should be renovated or retained as is so long as it continues to contribute to the total market value of the property, or until the return from a new improvement would more than offset the cost of demolishing the existing building and constructing a new one. (Appraisal Institute: The Appraisal of Real Estate, Eleventh Edition, 1996, pp. 50 and 51.)

Highest and best use of a site as though vacant assumes that a parcel of land is vacant or can be made vacant by demolition of existing improvements. Highest and best use of property as improved pertains to the use that should be made of the property as it exists. When a site contains improvements, the highest and best use may be determined to be different from the existing use. The existing use will continue unless and until land value in its highest and best use exceeds the sum of the value of the entire property in its existing use and the cost to remove the improvements. Since the subject’s improvements contribute value to the subject over and above the value of the land as if vacant, the Highest and Best Use of the subject as improved is the underlying premise to this valuation. To estimate the highest and best use of a property, four fundamental criteria must be addressed. The highest and best use must be legally permissible, physically possible, financially feasible, and maximally productive. Following is a discussion of each of these points as they apply to the subject as improved.

Legally Permissible: The subject’s existing 1,222-unit elevator apartment project with some commercial space is considered to be a legally permissible use. Based upon the preceding zoning analysis the subject, while developed beyond the maximum permitted density of 30 units per acre in the R-30 zone, is considered to be a legal, non-conforming use/structure. Expansion of the existing improvements is not permitted although the subject could be rebuilt if less than 50% of its current appraised value were damaged or destroyed. Conversion to a condominium or cooperative ownership is a legally permissible alternate use for the subject as improved. An analysis of the subject as a potential condominium conversion candidate is beyond the scope of this valuation.



RIVERSIDE PARK APARTMENTS		35

Physically Possible: The improvements were originally constructed for multi-tenant residential use and appear suitable for their current rental occupancy. The existing condition of the improvements is average. The subject is an adequately maintained rental apartment project and with good management should successfully compete with most nearby rental projects. An extensive renovation of the subject property is in process; however, this analysis has considered the subject in “As Is” condition operating as a rental property prior to renovation.

Financially Feasible and Maximally Productive: A review of comparable sales data indicates that some recent rental project acquisitions in the most desirable locations in the Washington, DC Metro area were motivated by condominium conversion. This trend includes newly built developments with separate utilities as well as older vintage projects. The subject’s utility allocation with utilities separately metered would normally lend itself to condominium conversion; however, its older vintage and unit mix detract from its condominium potential. Brokers report that the market for condominium conversions has begun to cool in recent months. The current owners of the subject property are likely to continue the subject’s use as an elevator rental apartment use well into the future and in fact, plan to renovate the subject and re-position it in the local rental sub-market.

Based upon the above analysis of the subject property and current market conditions, the maximally productive use of the subject is for continued operation as a market rate rental apartment project. The subject has a history of increasing income and relatively high occupancy rates prior to the onset of move-outs in anticipation of the renovation plan. In conclusion, the highest and best use of the subject, as improved, is for continued operation as a 1,222-unit elevator-style rental apartment project with a limited amount of commercial office and retail space.



RIVERSIDE PARK APARTMENTS		36

VALUATION PREMISE

This appraisal is for the subject’s Market Value under its Highest and Best Use as discussed above. In order to estimate the subject’s Market Value, the appraisal process is utilized. This process is an orderly program by which the problem is defined; the work necessary to solve the problem is planned; and the data involved is acquired, classified, analyzed and translated into an estimate of value. The Income Approach and Sales Comparison Approach have been applied in this appraisal. The Cost Approach is not applied since investors and lenders do not rely upon this approach for valuation of a property that was built approximately 36 years ago like the subject. An Insurable Value has been included in the addenda per the client’s request.

The Income Approach is based upon the present worth of the subject’s income potential as measured by capitalization of net income. The Market Approach consists of an analysis of comparable improved sales. The Income Approach includes analyses of comparable rental and expense data. The subject’s actual operating history during the January 2002 through April 2006 period has been considered. Net operating income has been converted into a value conclusion through Direct Capitalization.

The Income Approach and Sales Comparison Approach have been employed for indications of the subject’s Market Value as a rental project. The following pages contain our application of the Income Approach and Sales Comparison Approach to value.

INCOME APPROACH

In the Income Approach, the following steps have been employed:

1)		Estimate of gross income — The subject’s estimated gross income potential is based upon an analysis of the local rental market. An adjustment for vacancy and collection losses is also considered for an estimate of effective gross income. Income from various forms of other income including month to month fees, commercial rent, utility income (RUBS), laundry income, cable TV income, late charges, etc. has also been projected.

2)		Estimate of expenses — The subject’s expenses are estimated based upon the subject’s actual history of expenses during the January 2002 through April 2006 period and the experience of other similar properties in the northern Virginia market. This data is considered adequate to make an estimate of the subject’s expenses over the next 12 months assuming stabilized operations and the subject’s “As Is” condition prior to renovation.

3)		Capitalization of net income for an indication of Market Value — The selection of an appropriate capitalization technique and rate is based upon the characteristics of the subject’s income stream and the nature of the investment. The most appropriate method is dictated by the practices most commonly used by the typical purchaser of properties like the subject. Direct capitalization through Derivation from Comparable Sales and by the Band of Investment Technique has been applied.

RIVERSIDE PARK APARTMENTS

Estimate of Gross Income

The subject’s projected gross income consists primarily of rental income from 1,222 rental units that include three different efficiency-style units, 1-bedroom and 2-bedroom units. The current rent roll dated May 25, 2006 has been analyzed in light of comparable rentals to provide a basis for an estimate of the subject’s economic rents assuming “As Is” condition prior to renovation. It should be noted that the subject’s planned renovation has required the ownership to position the project’s occupancy for renovation construction. As a result, some units are being intentionally vacated so that apartments can be renovated. The May 25, 2006 rent roll shows 252 vacant units including down units while the May 13, 2005 rent roll indicated 168 vacant units and the December 16, 2004 showed 70 vacant units. Due to the elevated vacancies at the subject as of the date of this valuation, the scheduled rents of the May 25, 2006 rent roll are elevated since the vacant units are included at their market rents which would generally be above their actual rents. These vacant units are generally in rentable condition. The following pages contain detailed descriptions of these comparable rental projects. The following chart summarizes the current street rents of the rent comparables.

Summary of Comparable Rentals


	*Project Name*	*# Units*	*Yr Blt*	*# Vac*	*Vac Rate*	*Studio Rent*	*1BR Rent*	*2BR Rent*	*Utilities Included*

1	Huntington Gateway	443	1990	7	1.6%	$1,145-$1,390	$1,140-$1,625	$1,540-$1,930	Cold water
2	Belle Haven Towers	569	1964-73	9	1.6%	$829-$950	$960-$1,157	$1,186-$1,415	Varies
3	Hunting Point on the Potomac	530	1948	60	11.3%	$869-$941	$1,054-$1,190	$1,400-$1,473	All
4	Carydale East	233	1965	5	2.1%	$760-$848	$928-$1,059	$1,238-$1,389	All
5	Meridian at Carlyle	403	2001	4	1.0%	$1,230-$1,630	$1,475-$1,865	$1,930-$2,430	None
6	The Reserve at Eisenhower	250	2001	5	2.0%	—	$1,450-$1,970	$1,785-$1,935	None
7	Meridian at Braddock Station	480	1991-2002	4	0.8%	$1,195	$1,285-$1,365	$1,675-$1,830	None
8	The Summit	142	1980	2	1.4%	—	$1,335-$1,454	$1,631-$1,795	All
9	3001 Park Center	326	1989	4	1.2%	—	$1,065-$1,585	$1,585-$2,130	None
10	London Park Towers	458	1963	15	3.3%	$896-$1,010	$1,056-$1,207	$1,465-$1,552	All
11	Southern Towers	2,293	1964	8	0.3%	$775-$860	$945-$1,020	$1,250-$1,395	All
12	Eos 21 Apartments	1,200	1963-67	98	8.2%	$930	$1,100-$1,150	$1,420-$1,465	Ht., ckg., electricity
13	Cascade at Landmark	227	1990	6	2.6%	—	$1,212-$1,650	$1,495-$1,766	None
14	Carlyle Mill	317	2002	4	1.3%	—	$1,585-$1,900	$1,830-$2,400	None

	Market Totals/Averages	7,871		231	2.9%	$760-$1,630	$928-$1,900	$1,186-$2,430

Subject: Riverside Park (5/06)		1,222	1968-70	252	20.6%	$780-$895est.	$990est.	$1,290est.	None (RUBS)

The rentals cited herein include a variety of rental projects ranging in age from 1948 to new Class A projects built in the last few years. Market rents have been estimated based on the subject’s rent roll, recent leasing history, street rents and market data.

RIVERSIDE PARK APARTMENTS

Estimate of Apartment Income

The subject’s economic rents on an “As Is” basis are estimated in consideration of current and past scheduled rents and the rental rates reported at the comparable rental projects. Economic rents for the subject condition are generally within the range of the current streets and are reasonable based upon the subject’s recent history and comparable rental data. The projected economic rents are toward the lower end of the range of rents exhibited by the rent comparables by unit type. Some of the subject’s apartments have already been renovated and lease for $100 per month premiums. Some of the subject’s units also are leased at $10 per month premiums for floor level or for premium views. These premiums are included in the scheduled rent ranges below. The following chart contains a summary of the estimated economic rents assuming “As Is” condition prior to renovation as compared to the subject’s current scheduled rents according to the May 25, 2006 rent roll and the reported street rents.


No. of	Unit Room Count						Total		SF Area		No. Units				Scheduled Rents						Total		Market		Total
Units	Tot		BR		ba		Rooms		Per Unit		Vacant		Street Rents		Min		Max		Avg		Rents		Rents		Rents
14		2		E		1		28		289		0	$	739-779	$	750	$	819	$	785	$	10,996	$	780	$	10,920
140		2		E		1		280		500		3	$	859-889	$	720	$	949	$	844	$	118,096		860	$	120,400
70		2		E		1		140		550		20	$	929-959	$	787	$	1,009	$	885	$	61,962		895	$	62,650
741		3.5		1		1		2594		820		122	$	949-1,049	$	764	$	1,180	$	976	$	723,531		990	$	733,590
257		4.5		2		2		1157		1134		107	$	1,299-1,329	$	1,118	$	1,489	$	1,291	$	331,851		1,290	$	331,530

1222	< TOTALS >							4199				252									$	1,246,436			$	1,259,090

Potential gross apartment rent is projected at $1,259,090 per month or $15,109,080 per year. The above economic rents include no utilities since the subject’s residents are billed for their utility usage under a Ratio Utility Billing System (RUBS). The RUBS program at the subject charges tenants for their use of electricity, water and sewer usage and trash removal.

This valuation has estimated the subject’s c “As Is” market value prior to renovation in accordance with the client’s request. As a result, the subject’s economic rents are based upon current conditions at the subject assuming stabilized property conditions. As of May 25, 2006, 252 of the subject’s 1,222 units were reported as vacant. This elevated vacancy rate is attributed to the subject’s ownership’s decision to allow units to remain vacant in anticipation of the pending renovation program.

Concessions

The subject’s operating history indicates concessions of $111,403 (0.8%) in 2002, $75,143 (0.6%) in 2003, $101,870 (0.8%) in 2004, $439,950 (3.0 %) in 2005 and $391,275 (2.6%) for annualized 2006 (four months). None of the fourteen rent comparables surveyed for this appraisal reported the use of concessions. The lack of concessions in the market is evidence of a strong rental market. Based on the subject’s reported history and in consideration of market data, rent concessions have been projected at 1.0% of gross apartment rent for this projection.



RIVERSIDE PARK APARTMENTS		54

Vacancy and Collection Loss

The subject’s May 25, 2006 rent roll shows 252 vacant units (20.6%) including down units. As noted previously, the subject’s renovation has required the ownership to position the project for the upcoming construction. As a result, some units are being intentionally vacated so that apartments can be renovated. The May 13, 2005 rent roll indicated 168 vacant units while the December 16, 2004 exhibited 70 vacant units. The December 2004 rent roll is more reflective of the subject’s vacancy rate on a stabilized basis which is the premise of this appraisal despite the subject’s current elevated vacancy rate. The subject’s vacancy history was reported as follows: 5.4% in 2002; 4.1% in 2003 and 5.6% in 2004. These vacancy rates reflect the subject’s occupancy prior to the onset of increased move-outs prior to the renovation currently underway as reflected in the subject’s 2005 vacancy loss rate of 15.9% and annualized 2006 rate of 24.2%. Following is a summary of the vacancy rates reported at the rent comparables which indicate a sub-market vacancy rate of 2.9%.


	*Project Name*	*# Units*		*Yr Blt*		*# Vac*		*Vac Rate*
1	Huntington Gateway		443		1990		7		1.6	%
2	Belle Haven Towers		569		1964-73		9		1.6	%
3	Hunting Point on the Potomac		530		1948		60		11.3	%
4	Carydale East		233		1965		5		2.1	%
5	Meridian at Carlyle		403		2001		4		1.0	%
6	The Reserve at Eisenhower		250		2001		5		2.0	%
7	Meridian at Braddock Station		480		1991-2002		4		0.8	%
8	The Summit		142		1980		2		1.4	%
9	3001 Park Center		326		1989		4		1.2	%
10	London Park Towers		458		1963		15		3.3	%
11	Southern Towers		2,293		1964		8		0.3	%
12	Eos 21 Apartments		1,200		1963-67		98		8.2	%
13	Cascade at Landmark		227		1990		6		2.6	%
14	Carlyle Mill		317		2002		4		1.3	%

	Market Totals/Averages		7,871				231		2.9	%

Some under-reporting of vacancies at the rent comparables is assumed. For the purposes of this valuation, the subject’s vacancy loss rate is projected at 5.5% based on the subject’s history between 2002 and 2004 ranging from 4.1% to 5.6% and in consideration of the market.



RIVERSIDE PARK APARTMENTS		55

Collection losses at the subject were 1.1% in 2002, 1.3% in 2003, 0.7% in 2004, 0.4% in 2005 and 0.2% for annualized 2006. A collection loss rate of 1.0% is projected for the subject. The appraiser has applied a combined vacancy and collection loss allowance of 6.5% against the economic apartment rent potential for the subject. The following chart summarizes the subject’s history of rental apartment income, concessions, vacancies and collection losses along with the undersigned’s projections:

SUMMARY OF APARTMENT RENTAL INCOME


Riverside Park	01-Jan-02			01-Jan-03			01-Jan-04			01-Jan-05			2006 Annualized			Appraiser's
1222 UNITS	31-Dec-02			31-Dec-03			31-Dec-04			31-Dec-05			4 months			Projection
Potential Gross Apartment Rent	$	13,440,333		$	13,208,382		$	13,514,635		$	14,493,249		$	14,967,078		$	15,109,080
Less Concessions		(111,403	)		(75,143	)		(101,870	)		(439,950	)		(391,275	)		(151,091	)
Adjusted Potential Gross Apartment Rent	$	13,328,930		$	13,133,239		$	13,412,765		$	14,053,299		$	14,575,803		$	14,957,989
Less Vacancies		(715,498	)		(537,419	)		(754,981	)		(2,236,930	)		(3,532,614	)		(822,689	)
Less Collection Losses		(150,549	)		(170,902	)		(88,156	)		(54,741	)		(28,149	)		(149,580	)
Total Vacancy and Collection Losses		(866,047	)		(708,321	)		(843,137	)		(2,291,671	)		(3,560,763	)		(972,269	)
Effective Gross Apartment Rent	$	12,462,883		$	12,424,918		$	12,569,628		$	11,761,628		$	11,015,040		$	13,985,720
Vacancy Percentage		-5.4	%		-4.1	%		-5.6	%		-15.9	%		-24.2	%		-5.5	%
Collection Loss Percentage		-1.1	%		-1.3	%		-0.7	%		-0.4	%		-0.2	%		-1.0	%
Total V & C Percentage		-6.5	%		-5.4	%		-6.3	%		-16.3	%		-24.4	%		-6.5	%

The appraiser’s gross apartment rent is only 1.0% above the May 25, 2006 rent roll that includes market rents for vacant units.

Commercial Income

As currently configured, the subject’s commercial component consists of 3 commercial units located in grade level spaces in Buildings I and II. The commercial space contains approximately 3,133 square feet of occupied space according to square foot figures reported by management. The following is a summary of the subject’s commercial leases along with unit sizes, current lease terms, current scheduled monthly rent per lease information provided to the undersigned effective May 25, 2006 and rent per square foot.


						Scheduled
		Lease				Monthly Rent
Location	Tenant	Area(s.f.)		Expiration		Rent		P.S.F.
1-107	D.F. Reynolds &
	J.G. Zaletel, DDS		1,134		12/31/2001	$	1,600	$	16.93
2-103	Variety Mart		1,710		12/31/2006	$	2,357	$	16.54
2-100	Riverside Cleaners		289		4/30/2004	$	801	$	33.26

TOTAL			3,133			$	4,758	$	18.22


*		Tenants with expired leases are occupying space on a “month-to-month” basis



RIVERSIDE PARK APARTMENTS		56

The subject’s commercial units are rented on a similar basis as the apartments with utilities paid by the tenant. The subject’s dentist, convenience store and dry cleaner have occupied space at the subject for many years and the income stream is considered stable. The rental rates for the above-cited commercial tenants are virtually the same as the lease rates from an appraisal completed by the undersigned four years ago in June 2002.

Summary of Commercial Rent Comparables

COMMERCIAL RENT COMPARABLE #1
Shirlington House Apartments
140 South Van Dorn Street
Arlington County, VA

This is a 436-unit 10-story elevator-served apartment project that has a convenience store. The current lease rate for the convenience store at this project, which occupies a 1,050 SF space, is $18,336 per year or $17.46 per square foot plus a $35 per month water charge. This building has a comparable location.

COMMERCIAL RENT COMPARABLE #2
Mt. Zephyr Business Park
8305 Richmond Highway
Alexandria, Fairfax County, VA

This two-story professional office building has 1,450 square feet of medical office space available and is offered at a lease rate of $20.45 per square foot on a net basis. This first-floor space represents a sub-lease through November 2007. This comparable has frontage along Route 1 south of the subject in the Hybla Valley area of Fairfax County. The quality of the space is slightly superior relative to the subject property. Location is generally similar although exposure on Route 1 is superior to the subject.

COMMERCIAL RENT COMPARABLE #3
Franconia Professional Center
6180 Old Franconia Road
Alexandria, Fairfax County, VA

This 48,000 plus square foot office building built in 1988 has 8,899 square feet available for lease with unit sizes ranging from 453 square feet to 1,960 square feet. The asking lease rates for these office suites range from $18.00 to $20.00 per square foot on a net basis. The location of this office building is inferior to the subject’s since it is not in as close a proximity to the City of Alexandria and the Capital Beltway as the subject. Exposure is considered superior to the subject property.



RIVERSIDE PARK APARTMENTS		57

The scheduled lease rates of the subject’s three commercial spaces range from $16.54 per square foot to $33.26 per square foot. The cleaner’s lease rate is at a higher average square foot figure due to the small size of the space at only 289 square feet. The cited commercial lease comparables generally support the lease rates of the subject’s current existing commercial tenants.

The subject’s three commercial units are rented similar to a residential unit with utilities paid for by the tenants. The average per square foot rent is $18.22 for the three occupied spaces at their scheduled rents. Based upon scheduled rents for the three spaces, commercial lease income is projected at $57,096 annually or $18.22 per square foot. A 10% vacancy and collection loss allowance is applied to this gross income projection equating in effective commercial income of $51,386 per year.


Riverside Park	01-Jan-02		01-Jan-03		01-Jan-04		01-Jan-05		2006 Annualized		Appraiser's
1222 UNITS	31-Dec-02		31-Dec-03		31-Dec-04		31-Dec-05		4 months		Projection
Commercial Rent	$	95,395	$	61,109	$	69,342	$	61,881	$	57,108	$	51,386

OTHER INCOME

Other income is produced at the subject in various forms including month-to-month fees, short term lease fees, utility/RUBS income, net corporate rent, laundry income, cable TV income, telephone income, antenna income, miscellaneous income, late charges, NSF charges, non-refundable administrative fees, deposit forfeitures, pet fees, lease cancellation fees and application fees. Some of the other charges at the subject include the following: application fees — $40; $300 security deposit; $250 administrative fee; 10% late fee after the 5^th of the month; termination fees equal to 1.5 months rent.

The subject’s history and projection of total other income including commercial income is shown on the following chart:

SUMMARY OF OTHER INCOME CATEGORIES


Riverside Park	01-Jan-02			01-Jan-03			01-Jan-04		01-Jan-05		2006 Annualized		Appraiser's
1222 UNITS	31-Dec-02			31-Dec-03			31-Dec-04		31-Dec-05		4 months		Projection
Month to Month	$	70,618		$	75,828		$	51,850	$	41,287	$	44,931	$	56,300	Based on 2003-2005 history
Short Term Lease Fee	$	8,261		$	42,336		$	23,470	$	14,373	$	11,871	$	26,700	Based on 2003-2005 history
Commercial Rent	$	95,395		$	61,109		$	69,342	$	61,881	$	57,108	$	51,386	2006 history less 10% V&CL
RUBS income — electricity	$	589,054		$	582,941		$	629,481	$	559,589	$	473,376	$	590,700	Based on 2003-2005 history
RUBS income — water/sewer	$	256,280		$	233,623		$	227,621	$	205,960	$	189,375	$	222,400	Based on 2003-2005 history
RUBS income — trash, misc.	$	0		$	0		$	0	$	110,743	$	86,781	$	98,800	Based on 2003-2005 history
Net Corporate Rent	$	(2,268	)	$	28,216		$	14,362	$	1,973	$	2,460	$	2,000	Based on 2005 history
Laundry Income	$	202,842		$	195,941		$	221,665	$	176,912	$	169,548	$	198,200	Based on 2003-2005 history
Cable TV income	$	56,232		$	42,702		$	54,903	$	41,723	$	53,316	$	46,400	Based on 2003-2005 history
Telephone Income	$	29,414		$	18,022		$	27,869	$	23,066	$	44,244	$	23,000	Based on 2003-2005 history
Antenna income	$	19,702		$	15,766		$	17,720	$	12,935	$	12,636	$	12,600	Based on 2005 history
Miscellaneous Income	$	18,452		$	(83,203	)	$	11,692	$	16,958	$	45,633	$	14,300	Based on 2004-2005 history
Late Charges	$	78,001		$	141,788		$	61,766	$	63,768	$	56,718	$	62,800	Based on 2004-2005 history
NSF Charges	$	7,250		$	6,480		$	4,770	$	3,395	$	3,255	$	4,900	Based on 2003-2005 history
Non-refundable Administrative Fees	$	72,680		$	88,140		$	75,050	$	80,000	$	53,250	$	81,100	Based on 2003-2005 history
Pet fees	$	16,816		$	18,853		$	22,741	$	25,766	$	21,183	$	22,500	Based on 2003-2005 history
Lease Cancellation	$	87,989		$	157,493		$	148,214	$	84,579	$	56,634	$	130,100	Based on 2003-2005 history
Application Fees	$	18,685		$	29,972		$	27,570	$	29,340	$	24,540	$	29,000	Based on 2003-2005 history

Total Effective Gross Other Income	$	1,625,403		$	1,656,007		$	1,690,086	$	1,554,248	$	1,406,859	$	1,673,186

Since these other income categories are reported on an effective gross basis, no adjustment for vacancy and collection losses is required.



RIVERSIDE PARK APARTMENTS		58

Income Conclusion

Following is a summary of the appraiser’s income projection for the subject assuming habitable condition with stabilized operations. The subject property is currently operated at an elevated vacancy rate of 20.6% in anticipation of a substantial renovation that was recently begun. Currently, 252 units are vacant as the subject’s buildings are being readied for a rehab program that was recently started in June 2006. This valuation is based upon the subject’s “As Is” condition before the start of renovation as of the date of this inspection (May 25, 2006) in accordance with the client’s instructions.


			Potential					Effective

Potential Gross Apartment Rent			$	15,109,080
Less Concessions	1.0	%		(151,091	)

Adjusted Potential Gross Apartment Rent				14,957,989
Total Vacancy & Collection Losses	6.5	%				(972,269	)

Effective Gross Apartment Rent									13,985,720
Effective Gross Other Income				1,673,186					1,673,186

Total Gross Income			$	16,631,175				$	15,658,906

EXPENSE NOTES

The appraiser analyzed expense statements for comparable properties along with the subject’s January 1, 2002 through April 30, 2006 history. The owner’s income and expense statements have been converted into the consolidated statement shown at the end of this section. In making this projection, consideration has been given to current rates where applicable, the reported history at the subject and comparable expense data. The following explanatory notes are for the one-year projection period beginning on the effective date of this appraisal based upon the subject’s “As Is” condition prior to renovation with stabilized operations.

Fixed Expenses

1. Real estate taxes are based upon the Fairfax County Assessor’s estimate of market value (703-222-8234). Properties are reassessed annually with the assessed values set at 100% of fair market value. Assessments are established on a calendar year basis. Tax rates are set between April and June of each year and are applied to the assessment which is in effect on the preceding January 1. The subject’s 2006 assessment will be utilized by Fairfax County to calculate the subject’s tax liability for the current calendar year. The current assessment, rates and taxes are reported below. The following Map Reference Number identifies the subject’s parcel: 0833-01-0101. The 2006 county tax rate is $0.89 per $100 of assessed value. In addition, the subject’s rate includes $.001 per $100 of assessed value as a Gypsy Moth Control tax. The overall tax rate for the subject is $0.90.



RIVERSIDE PARK APARTMENTS		59

Real Estate Tax Assessment Comparables


						Assessment
#	Project Name	Year Built		# Units		Per Unit
1	Munson Hill		1963		279	$	65,442
2	Fairfax Towers		1977		415	$	97,045
3	Belle Haven Towers		1964/73		569	$	85,275
4	Ravenwood Towers		1962		310	$	98,247
Subject	Riverside Park (2006)		1968-70		1222	$	73,724

Subject	Riverside Park (estimated)		1968-70		1222	$	92,155

The following table summarizes the subject’s current, historical and projected real estate tax assessments and expenses.


Real Estate Tax Calculations	2003		2004			2005			2006			2007 (Projected)
Land Assessment	$	28,106,000	$	34,216,000		$	36,660,000		$	73,320,000
Improvement Assessment	$	42,067,215	$	47,125,455		$	49,390,800		$	16,770,900

Total Assessment	$	70,173,215	$	81,341,455		$	86,050,800		$	90,090,900		$	112,614,000
Indicated Assessment Increase		—		15.9	%		5.8	%		4.7	%		25.0	%

Current Real Estate Tax Rate		1.161		1.131			1.001			0.900			0.900

Indicated Real Estate Tax Expense	$	814,711	$	919,972		$	861,369		$	810,818		$	1,013,526
Rounded	$	814,700	$	920,000		$	861,400		$	810,800		$	1,013,500
Real Estate Tax Expense/Unit	$	667	$	753		$	705		$	664		$	829

Indicated Increase		—		12.9	%		-6.4	%		-5.9	%		25.0	%



RIVERSIDE PARK APARTMENTS		60


Annual Real Estate Tax Expense 2006	$	810,800
Monthly Real Estate Tax Expense 2006	$	67,567
Number of Months in Projection		6

First Portion of Real Estate Tax Projection			$	405,402

Annual Real Estate Tax Expense 2007	$	1,013,500
Projected Monthly Real Estate Tax in 2007	$	84,458
Number of Months in Projection		6

Second Portion of Real Estate Tax Projection			$	506,748

Weighted Average Real Estate Tax Expense			$	912,150
	Rounded		$	912,200

If the subject’s assessment were increased 25% to $112,614,000 in 2007, a rent increase of about $14 per month would be required to offset the increased real estate tax expense.

2. Other taxes or assessments expenses were reported as $1,824 in 2002, $2,070 in 2003, $2,398 in 2004 and $8,431 in 2005. The projected expense is based upon the subject’s average 2004-2005 history at $5,400 per year or $4 per unit.

3. Insurance expenses were $249,179 in 2002, $259,777 in 2003, $286,943 in 2004 and $297,294 in 2005. The expense is projected at 3% above the 2005 history at $306,200 or $251 per unit. This projection is considered reasonable in consideration of six of the cited expense comparables which indicated insurance expenses ranging from $218 to $307 per unit.

4. License expenses were reported as $37,009 in 2002, $45,806 in 2003, $50,178 in 2004 and $37,610 in 2005. The projected expense is based upon the subject’s average 2003-2005 history plus 5% at $46,800 or $38 per unit. This expense includes business license fees which are charged at a rate of $.26 per $100 of effective gross income (EGI) plus other miscellaneous taxes. Four of the attached expense comparables exhibit license-related expenses in a tight range of $35 to $40 per unit bracketing the projected expense for the subject property.



RIVERSIDE PARK APARTMENTS		61

Operational Expenses

7. Gas expenses totaled $155,149 in 2002, $149,985 in 2003, $175,400 in 2004 and $260,667 in 2005. Gas service is provided by Washington Gas Energy Services (888-236-9437). Gas costs continue to fluctuate based on seasonal climate changes, supply and demand and world events and have recently trended higher. The subject passes the cost of most utilities onto the tenants (RUBS). Despite this, the subject’s owner remains responsible for some utility costs associated with common areas. The projected expense is based upon the subject’s most recent full-year 2005 history plus 10% at $286,700 per year or $235 per unit.

8. Electricity expenses were $875,075 in 2002, $906,456 in 2003, $867,882 in 2004 and $876,614 in 2005. The majority of the cost for electricity at the subject is recouped through the RUBS with electricity income at $559,589 in 2005. The subject’s supplier, Dominion Virginia Power (888-667-3000), reports that no rate increases are anticipated through 2010 due to a rate freeze. Electricity expenses are projected based upon the subject’s 2005 history plus 5% at $920,400 per year or $753 per unit. Based on the projection of RUBS electricity income herein, net electricity expenses equate to about $317,025 or $259 per unit.

9. Water and sewer service is provided to the subject by the Fairfax County Water Authority (703-698-5800) and the Fairfax County Department of Public Works (703-246-5015), respectively. The water rate increased 3.4% while sewer rates increased 2.5% effective April 1, 2006. Water and sewer expenses were reported as follows: $196,039 in 2002, $357,181 in 2003, $317,436 in 2004 and $277,596 in 2005. The projected expense is based upon the subject’s average 2003-2005 history plus 5% at $333,300 per year or $273 per unit.

10. Trash removal expenses were reported as follows: $93,879 in 2002; $102,861 in 2003; $85,425 in 2004 and $86,493 in 2005. Six of the eight expense comparables indicate trash removal expenses ranging from $68 to $82 per unit. The expense is projected at 3% above the 2005 history at $89,100 per year or $73 per unit. Trash removal services are provided by Potomac Disposal Services of Virginia, LLC. It is noted that the subject bills tenants for trash removal (RUBS) which is included as other income.

11. Pest control expenses were reported as follows: $5,487 in 2002; $8,367 in 2003; $7,382 in 2004 and $16,520 in 2005. The projected expense is based upon the subject’s average 2003 through annualized 2005 history plus 5% at $11,300 per year or $9 per unit.

12. Building maintenance and repairs expenses were $211,217 in 2002, $374,755 in 2003, $396,860 in 2004 and $380,561 in 2005. The expense is projected in consideration of the subject’s average history for this expense item between 2003 and annualized 2005 plus 5% at $403,300 per year or $330 per unit. In addition to building maintenance and repairs, a separate expense for replacement reserves is projected later in this analysis. Replacement reserves are projected at $442 per unit. Total repairs and maintenance plus reserves are $772 per unit which should be adequate to properly maintain the subject.

RIVERSIDE PARK APARTMENTS

13. Interior and exterior decorating expenses were $121,852 in 2002, $190,124 in 2003, $186,153 in 2004 and $128,603 in 2005. The projected expense is based upon the subject’s average history between 2003 and 2005 plus 5% at $176,700 per year or $145 per unit. The projected expense is supported by the expense comparables which ranged from $109 to $200 per unit excluding three extremes.

14. Cleaning expenses were reported as follows: $293,865 in 2002; $323,022 in 2003; $334,236 in 2004 and $352,008 in 2005. The projected expense is based upon the subject’s average history between 2003 and 2005 plus 5% at $353,200 per year or $289 per unit.

16. Elevator maintenance expenses were $48,269 in 2002, $45,609 in 2003, $47,496 in 2004 and $48,681 in 2005. The projected expense is based upon the subject’s 2005 history plus 3% at $50,100 per year or $41 per unit. The subject property is served by twelve passenger elevators. Apex Elevator Corporation provides elevator maintenance services at the subject property.

17. Pool maintenance expenses were reported as follows: $37,366 in 2002; $52,950 in 2003; $61,396 in 2004 and $41,480 in 2005. The projected expense is based upon the subject’s 2003-2005 history plus 5% at $54,500 per year or $45 per unit. American Pool Service, Inc provides pool management services at the subject property. Two expense comparables indicated pool expenses at $47 per unit in support of this projection.

18. Parking area maintenance and snow removal expenses have fluctuated widely over the reported history as follows: $34,484 in 2003; $4,760 in 2004 and $11,203 in 2005. The projected expense is stabilized based upon the average 2003-2005 history plus 5% at $17,700 per year or $14 per unit. No separate expense for this item was reported during the 2002 history.

19. Gardening expenses were $73,601 in 2002, $78,635 in 2003, $85,133 in 2004 and $51,502 in 2005. The projected expense is stabilized based upon the average 2003-2005 history plus 5% at $75,300 per year or $62 per unit. Complete Landscaping provides gardening-related services at the subject property. Five expense comparables indicated gardening expenses ranging from $48 to $87 per unit in support of this projection.

20. Non-resident management fees typically range from 3% to 6% of effective gross annual income (EGI). The subject’s history for this expense item reflects nonresident management fees at 4% of gross collections. The subject property is professionally managed by an entity related to ownership and is not representative of an arms-length market rate fee. The appraiser interviewed three local management companies for this assignment (Equity Management, Gates Hudson Associates and CT Management) to determine an appropriate market management fee rate. These managers indicated that the subject could be managed for a fee between 2% and 2.75%. For the purposes of this analysis, it is estimated that the subject could be managed for a 2.5% fee in consideration of the subject’s large project size with 1,222 units, location and rent levels. At 2.5% of the effective gross income projected herein, nonresident management fees equate to $320 per unit.



RIVERSIDE PARK APARTMENTS		63

21-30. Payroll expenses are projected in consideration of the subject’s actual history between January 2002 and April 2006. The appraiser was provided with a payroll schedule dated May 31, 2006 showing 23 employees including 13 office employees and 10 maintenance employees. The following chart summarizes the subject’s history for payroll related expenses and the appraiser’s projection for these various expense items:

PAYROLL SUMMARY


Riverside Park	01-Jan-02			01-Jan-03			01-Jan-04			01-Jan-05			2006 Annualized			Appraiser’s
1222 UNITS	31-Dec-02			31-Dec-03			31-Dec-04			31-Dec-05			4 months			Projection
21 Resident manager’s salary	$	378,092		$	365,964		$	405,215		$	474,829		$	524,397		$	489,100
25 Engineer’s salary	$	120,451		$	205,483		$	235,957		$	249,084		$	97,164		$	256,600
29 Other salaries	$	14,248		$	61,778		$	112,295		$	81,620		$	64,110		$	84,100

Subtotal Salaries	$	512,791		$	633,225		$	753,467		$	805,533		$	685,671		$	829,800

30 Payroll taxes & benefits	$	153,106		$	149,886		$	188,072		$	223,548		$	261,234		$	207,500
Payroll taxes % of Salaries		29.9	%		23.7	%		25.0	%		27.8	%		38.1	%		25.0	%
22 Resident manager’s apt. allowance	$	26,167		$	0		$	0		$	0		$	0		$	0
24 Apartment allowances	$	0		$	16,996		$	36,960		$	51,729		$	39,369			39,400
28 Security related expenses	$	165,552		$	177,457		$	168,546		$	181,060		$	186,714		$	186,700
Total Payroll and Related Expenses	$	512,791		$	633,225		$	1,147,045		$	1,261,870		$	1,172,988		$	1,263,400

Per Unit	$	420		$	518		$	939		$	1,033		$	960		$	1,034

Resident manager’s salaries and engineer’s salaries are projected based upon the subject’s most recent 2005 history plus 3% to account for increased salary expenses at $489,100 and $256,600 per year, respectively. Other salaries are also projected based upon the subject’s 2005 history plus 3% at $84,100 per year or $69 per unit. Payroll taxes and benefits are projected at 25% of resident manager, engineer and other salaries based on the history. Security related expenses are projected based upon the subject’s annualized 2006 history at $186,700 per year or $153 per unit. In addition to salary-related expenses, the appraiser projected quarters allowances based upon the annualized 2006 history at $39,400 per year or $32 per unit. The appraiser was provided with a list of employee units that includes two rent-free units and three partially discounted units. The total payroll and related expenses for the subject are projected at $1,263,400 per year or $1,034 per unit. The projected expense is bracketed by the older vintage expense comparables that range from $857 to $1,245 per unit.

31. Advertising expenses were reported as follows: $91,929 in 2002; $118,542 in 2003, $105,403 in 2004 and $165,010 in 2005. The projected expense is based upon the subject’s 2005 history plus 3% at $170,000 per year or $139 per unit with support from the attached expense comparables which ranged from $91 to $224 per unit with an average of $141 per unit.

32. Telephone expenses were $49,003 in 2002, $60,043 in 2003, $57,144 in 2004 and $56,507 in 2005. The projected expense is based upon the subject’s average 2003-2005 history plus 5% at $60,800 per year or $50 per unit. Seven of the attached expense comparables indicate telephone expenses ranging from $28 to $54 per unit bracketing the projected expense.

33. Legal and Audit expenses were reported as $39,964 in 2002, $44,020 in 2003, $21,277 in 2004 and $46,009 in 2005. The projected expense is based upon the subject’s average 2003-2005 history plus 5% at $39,000 per year or $32 per unit.

35. Office/Model rent expenses were $22,092 in 2002, $38,848 in 2003, $37,382 in 2004 and $37,359 in 2005. The projected expense is based upon the subject’s 2005 history plus 3% at $38,500 per year or $32 per unit.


RIVERSIDE PARK APARTMENTS		64

36. Administrative and miscellaneous expenses were $133,708 in 2002, $133,130 in 2003, $169,295 in 2004 and $191,149 in 2005. The projected expense is based upon the subject’s average 2003-2005 history plus 5% at $172,800 per year or $141 per unit. Six of the attached expense comparables exhibit administrative and miscellaneous expenses ranging from $113 to $142 per unit bracketing the projected expense.

37-42. Replacement reserves have been calculated based upon straight-line recapture of short-lived components over their useful lives. The underlying premise is that periodic installments are made into a reserve account to provide sufficient funds to replace components at the ends of their useful lives. Replacement reserves for the subject in its current “As Is” condition are computed as follows:

REPLACEMENT RESERVES


Item	# Units		$/Unit		Total		Life		Reserve
Carpets — Units		1222	$	1,000	$	1,222,000		7	$	174,600
Carpets — Hallways		1		180,000		180,000		7		25,700
Ranges & Refrigerators		1222		770		940,940		12		78,400
Microwave Ovens		1222		150		183,300		10		18,300
Dishwashers		988		190		187,720		10		18,800
Garbage Disposal		1222		50		61,100		10		6,100
HVAC units		2477		650		1,610,050		12		134,200
Hot water heaters		3		200,000		600,000		10		60,000
Roofs		1804		200		360,800		15		24,100

Total Reserves			$	442					$	540,200

Total projected expenses and reserves are $6,718,400 or $5,498 per unit. This estimate is supported by the subject’s history and comparable expense data presented on the following pages. The attached expense comparables exhibit total expenses on a per unit basis ranging from $5,078 to $6,157 with varying utility allocations. The subject with most utilities included in the expense history and much of it recouped by the owner via RUBS, the subject’s expenses with utilities on a net basis equate to $4,752 per unit.


RIVERSIDE PARK APARTMENTS		65

CONSOLIDATED STATEMENT


Riverside Park	01-Jan-02			01-Jan-03			01-Jan-04			01-Jan-05			2006 Annualized			Appraiser’s			Projection
1222 UNITS	31-Dec-02			31-Dec-03			31-Dec-04			31-Dec-05			4 months			Projection			per Unit
Potential Gross Apartment Rent	$	13,440,333		$	13,208,382		$	13,514,635		$	14,493,249		$	14,967,078		$	15,109,080		$	12,364
Less Concessions		(111,403	)		(75,143	)		(101,870	)		(439,950	)		(391,275	)		(151,091	)		(124	)
Adjusted Potential Gross Apartment Rent	$	13,328,930		$	13,133,239		$	13,412,765		$	14,053,299		$	14,575,803		$	14,957,989			12,241
Less Vacancies		(715,498	)		(537,419	)		(754,981	)		(2,236,930	)		(3,532,614	)		(822,689	)		(673	)
Less Collection Losses		(150,549	)		(170,902	)		(88,156	)		(54,741	)		(28,149	)		(149,580	)		(122	)
Total Vacancy and Collection Losses		(866,047	)		(708,321	)		(843,137	)		(2,291,671	)		(3,560,763	)		(972,269	)		(796	)
Effective Gross Apartment Rent		12,462,883			12,424,918			12,569,628			11,761,628			11,015,040			13,985,720			11,445
Month to Month		70,618			75,828			51,850			41,287			44,931			56,300			46
Short Term Lease Fee		8,261			42,336			23,470			14,373			11,871			26,700			22
Commercial Rent		95,395			61,109			69,342			61,881			57,108			51,386			42
RUBS income — electricity		589,054			582,941			629,481			559,589			473,376			590,700			483
RUBS income — water/sewer		256,280			233,623			227,621			205,960			189,375			222,400			182
RUBS income — trash, misc.		0			0			0			110,743			86,781			98,800			81
Net Corporate Rent		(2,268	)		28,216			14,362			1,973			2,460			2,000			2
Laundry Income		202,842			195,941			221,665			176,912			169,548			198,200			162
Cable TV income		56,232			42,702			54,903			41,723			53,316			46,400			38
Telephone Income		29,414			18,022			27,869			23,066			44,244			23,000			19
Antenna income		19,702			15,766			17,720			12,935			12,636			12,600			10
Miscellaneous Income		18,452			(83,203	)		11,692			16,958			45,633			14,300			12
Late Charges		78,001			141,788			61,766			63,768			56,718			62,800			51
NSF Charges		7,250			6,480			4,770			3,395			3,255			4,900			4
Non-refundable Administrative Fees		72,680			88,140			75,050			80,000			53,250			81,100			66
Pet fees		16,816			18,853			22,741			25,766			21,183			22,500			18
Lease Cancellation		87,989			157,493			148,214			84,579			56,634			130,100			106
Application Fees		18,685			29,972			27,570			29,340			24,540			29,000			24
Total Effective Gross Other Income		1,625,403			1,656,007			1,690,086			1,554,248			1,406,859			1,673,186			1,369
Effective Gross Income		14,088,286			14,080,925			14,259,714			13,315,876			12,421,899			15,658,906			12,814
FIXED EXPENSES
1 Real Estate Taxes		827,851			814,711			919,972			861,369			913,053			912,200			746
2 Other taxes or assessments		1,824			2,070			2,398			8,431			5,913			5,400			4
3 Insurance		249,179			259,777			286,943			297,294			331,305			306,200			251
4 Licenses		37,009			45,806			50,178			37,610			49,212			46,800			38
5 Unsubordinated ground rent		0			0			0			0			0			0			0

Subtotal: Fixed Expenses	$	1,115,863		$	1,122,364		$	1,259,491		$	1,204,704		$	1,299,483		$	1,270,600		$	1,040

OPERATIONAL EXPENSES
6 Fuel		0			0			0			0			0			0			0
7 Gas		155,149			149,985			175,400			260,667			373,719			286,700			235
8 Electricity		875,075			906,456			867,882			876,614			923,889			920,400			753
9 Water & sewer		196,039			357,181			317,436			277,596			221,619			333,300			273
10 Trash removal		93,879			102,861			85,425			86,493			80,781			89,100			73
11 Pest control		5,487			8,367			7,382			16,520			11,385			11,300			9
12 Building maintenance & repairs		211,217			374,755			396,860			380,561			359,583			403,300			330
13 Interior & exterior decorating		121,852			190,124			186,153			128,603			149,604			176,700			145
14 Cleaning expenses		293,865			323,022			334,236			352,008			338,487			353,200			289
15 Supplies		0			0			0			0			0			0			0
16 Elevator maintenance		48,269			45,609			47,496			48,681			53,979			50,100			41
17 Pool maintenance		37,366			52,950			61,396			41,480			41,505			54,500			45
18 Parking area maint. & snow removal		0			34,484			4,760			11,203			17,550			17,700			14
19 Gardening		73,601			78,635			85,133			51,502			32,403			75,300			62
20 Nonresident management		569,665			565,975			568,003			536,258			495,498			391,500			320
21 Resident manager’s salary		378,092			365,964			405,215			474,829			524,397			489,100			400
22 Resident manager’s apt. allowance		26,167			0			0			0			0			0			0
23 Custodian’s salary		0			0			0			0			0			0			0
24 Custodian’s apt. allowance		0			16,996			36,960			51,729			39,369			39,400			32
25 Engineer’s salary		120,451			205,483			235,957			249,084			97,164			256,600			210
26 Recreation salary		0			0			0			0			0			0			0
27 Telephone operator’s salary		0			0			0			0			0			0			0
28 Security related expenses		165,552			177,457			168,546			181,060			186,714			186,700			153
29 Other salaries		14,248			61,778			112,295			81,620			64,110			84,100			69
30 Payroll taxes		153,106			149,886			188,072			223,548			261,234			207,500			170
31 Advertising		91,929			118,542			105,403			165,010			270,465			170,000			139
32 Telephone		49,003			60,043			57,144			56,507			51,531			60,800			50
33 Legal & audit		39,964			44,020			21,277			46,009			20,772			39,000			32
34 Corporate Unit Expenses		0			0			0			0			0			0			0
35 Office/Model Rent		22,092			38,848			37,382			37,359			23,436			38,500			32
36 Administrative & miscellaneous		133,708			133,130			169,295			191,149			180,615			172,800			141

Subtotal: Operational Expenses	$	3,875,776		$	4,562,551		$	4,675,108		$	4,826,090		$	4,819,809		$	4,907,600		$	4,016

REPLACEMENT RESERVES
37 Carpeting		0			58,045			72,112			73,692			0			200,300			164
38 Ranges, refrigerators, microwaves		18,455			17,074			31,947			5,750			10,062			96,700			79
39 Dishwashers, disposals		65,803			5,070			13,648			3,870			17,517			24,900			20
40 HVAC + HWH		0			0			0			0			0			194,200			159
41 Roof replacement		0			0			0			0			0			24,100			20
42 Paving/miscellaneous replacements		0			0			0			0			0			0			0

Subtotal: Replacement Reserves	$	84,258		$	80,189		$	117,707		$	83,312		$	27,579		$	540,200		$	442

TOTAL EXPENSES & RESERVES	$	5,075,897		$	5,765,104		$	6,052,306		$	6,114,106		$	6,146,871		$	6,718,400		$	5,498
OPERATING EXPENSE RATIO		33.9	%		39.0	%		40.1	%		39.2	%		38.5	%		40.4	%
NET OPERATING INCOME	$	9,012,389		$	8,315,821		$	8,207,408		$	7,201,770		$	6,275,028		$	8,940,506		$	7,316
Capitals excluded from above	$	633,862		$	384,880		$	207,733		$	168,775		$	288,750			—			—
Capitalized @														6.0	%		149,000,000		$	121,931


RIVERSIDE PARK APARTMENTS		66

EXPENSE COMPARABLES

Northern Virginia Elevator Apartment Expense Comparables

Presented on a Per Unit Basis


Comparable
Location	Arlington		Alexandria		Arlington		Arlington		Arlington		Arlington		Arlington		Arlington
Expense Year	2005		2003		2003		2003		2003		2002		2001		2001
# of Units	450-500		150-200		200-250		250-300		200-250		400-450		700-750		350-400
Average Unit Square Footage	753		697		841		682		833		906		844		968
Year Built	1963		1967		1959		1963		1966		1998		1994		1985
Utilities Included in Rent	All		All		All		All		All		None		W & S		None
FIXED EXPENSES
1 Real Estate Taxes		837		559		719		832		843		1,464		1,480		1,295
2 Other taxes or assessments		1		0		0		0		0		16		0		4
3 Insurance		281		218		239		292		307		229		94		80
4 Licenses		39		60		35		36		40		63		0		57
5 Unsubordinated ground rent		0		0		0		0		0		0		0		0

Subtotal: Fixed Expenses		1,157		838		993		1,159		1,190		1,773		1,574		1,436

OPERATIONAL EXPENSES
6 Fuel		0		0		0		0		28		0		0		0
7 Gas		385		350		528		322		331		0		0		0
8 Electricity		346		481		443		518		491		217		426		264
9 Water & sewer		283		434		223		281		74		74	Item 8			14
10 Trash removal		109		82		78		77		68		68		49		70
11 Pest control		9		29		51		31		39		4		0		11
12 Building maintenance & repairs		154		251		338		286		272		208		782		173
13 Interior & exterior decorating		239		109		195		148		200		63		373		148
14 Cleaning expenses		70		338		656		594		488		103		0		124
15 Supplies		24		1		0		0		0		0		0		0
16 Elevator maintenance		45		116		69		83		118		97		0		82
17 Pool maintenance		47		0		97		93		0		47		0		62
18 Parking area maint. & snow removal		28		49		37		51		53		0		1		16
19 Gardening		73		65		68		104		87		17		48		94
20 Nonresident management		437		525		354		369		429		601		574		553
21 Resident manager’s salary		551		386		485		404		279		1,258	Item 29			569
22 Resident manager’s apt. allowance		31		176		80		149		193		14		0		125
23 Custodian’s salary		135		0		0		0		0		0		0		151
24 Custodian’s apt. allowance		0		0		0		0		0		0		0		0
25 Engineer’s salary		281		252		291		190		268	Item 21		Item 29			363
26 Elevator operator’s salary		0		75		0		0		0		0		0		0
27 Telephone operator’s salary		0		0		0		0		0		0		0		0
28 Security personnel’s salary		3		52		162		120		0		0		19		91
29 Other salaries		29		57		36		60		47		0		1,368		0
30 Payroll taxes		216		74		96		62		70		290	Item 29			0
31 Advertising		113		224		136		91		192		143		92		94
32 Telephone		28		42		29		46		41		42		0		54
33 Legal & audit		9		74		79		96		86		41		31		3
34 Leased furniture		0		0		0		0		0		0		0		0
35 Office/Model Rent		0		0		0		0		0		108		0		148
36 Miscellaneous Administrative		124		136		113		115		113		64		142		82

Subtotal: Operational Expenses		3,767		4,377		4,645		4,291		3,968		3,460		3,906		3,292

REPLACEMENT RESERVES
37 Carpeting		0		0		0		0		0		0		106		0
38 Ranges & refrigerators		0		0		0		0		0		0		65		0
39 Dishwashers & disposals		0		0		0		0		0		0		0		0
40 Hot water heaters		0		0		0		0		0		0		0		0
41 Washers and dryers		0		0		0		0		0		0		0		0
42 Miscellaneous replacements		300		300		519		176		59		350		100		350

Subtotal: Replacement Reserves		300		300		519		176		59		350		272		350

TOTAL EXPENSES & RESERVES	$	5,225	$	5,214	$	6,157	$	5,626	$	5,217	$	5,583	$	5,752	$	5,078

TOTAL PAYROLL RELATED EXPENSES	$	1,245	$	1,071	$	1,150	$	985	$	857	$	1,563	$	1,387	$	1,299


RIVERSIDE PARK APARTMENTS		67

CAPITALIZATION

The projected first year Net Income Before Taxes and Debt Service has been capitalized into a value indication with an overall capitalization rate. The Overall Capitalization Rate has been derived through an application of Mortgage-Equity Theory known as the Band of Investment Technique and is further supported by market sales activity. The Band of Investment Technique utilizes a synthesis of mortgage interest and equity dividend rates based upon the following relationship:

R = mf + (l-m) Re
where: R = Overall Capitalization Rate
m = loan to value ratio
f = annual debt service constant
Re = equity dividend rate (cash-on-cash)

Interest only financing is commonly used for acquisitions in the current market. With interest only financing, an equity dividend rate of 5.5% is considered appropriate for the subject’s location, current market conditions and alternative investments such as corporate bonds and long-term treasury issues. Current mortgage terms are 6.15% interest rate; 10-year term, 30-year amortization and a 70% to 80% loan-to-value ratio. The subject’s overall capitalization rate utilizing this Market Rate financing (interest only) is calculated as follows:


Derivation of Overall Rate (Interest Only)
Interest Rate		6.15	%
Amortization	30 Years
Loan-to-Value Ratio		80	%
Equity Dividend Rate		5.5	%


	Constant				Portion
Mortgage		6.15	%	x		80.00	%	=	0.0492
Equity		5.50	%	x		20.00	%	=	0.0110
	Overall Rate								0.0602
	Rounded								6.0	%

In addition to Band of Investment, overall capitalization rates were extracted from available sales data. Following is a summary of overall rates reflected by the comparable sales.


Sale #	Project Name	Location	Units		Sale Date	Year Built		Exp %			Cap Rate
1	Skyline Towers	Fairfax, VA		939	Dec-05		1970		38.3	%		5.4	%
2	Arlington Overlook	Arlington, VA		711	Aug-04		1961		40.1	%		5.5	%
3	Ravenwood Towers	Fairfax, VA		310	Aug-04		1962		44.8	%		6.1	%
4	Georgian Towers	Montgomery, MD		885	Mar-04		1969		40.8	%		7.3	%
5	Chesterfield House	Arlington, VA		101	Nov-04		1968		49.2	%		5.5	%
6	The Alexandria	Alexandria, VA		1524	Jul-04		1963-67		39.7	%		6.0	%
Subject	Riverside Park			1222	N/A		1968-70		40.9	%	6.0%est


RIVERSIDE PARK APARTMENTS		68

The comparable sales represent the most similar and recent apartment project sales from the subject’s Northern Virginia and Montgomery County in Maryland markets that are part of the Washington, DC regional market. The cited sales represent the most similar vintage and similar scale projects available for analysis. With the subject’s large scale at 1,222 units, four of six sales had project sizes ranging from 711 to 1,524 units. The arrayed sales were built between 1961 and 1970 bracketing the subject’s 1968-1970 vintage. These projects were in similar condition relative to the subject with post-sale renovations planned in most cases. The subject’s capitalization rate is estimated at 6.0% based on current investor requirements in consideration of the above overall rate data indicated by the comparable sales in Northern Virginia that range from a low of 5.4% to 6.1%. Despite the increase in mortgage rates over the last twelve months, the lack of supply and the abundance of mortgage capital have maintained capitalization rates in this range. This capitalization rate is for the subject in its “As Is” condition prior to renovation. Area brokers report strong demand for apartments with capitalization rates at low levels due to the availability of favorable financing and in light of alternative investment options. A project of the subject’s scale is rare and would generate great interest among institutional investors. With support from the above sales data and in consideration of the 6.0% overall rate developed by the Band of Investment, the subject’s overall capitalization rate is applied as follows:


Direct Capitalization	Net Income / Overall Rate	=	Value Indication
	$8,940,506/ 6.0%	=	$	149,008,433
	Rounded		$	149,000,000

A substantial renovation of the subject was recently begun. This valuation has estimated the subject’s market value prior to renovation as of May 25, 2006 in accordance with the client’s request.


RIVERSIDE PARK APARTMENTS		69

SALES COMPARISON APPROACH

The Sales Comparison Approach is based on the premise that the market value of a property is directly related to the prices of comparable, competitive properties. The value of a property in the market is set by the availability of substitute properties of similar utility and desirability. Value is sustained when the relationships between land and the improvements on the land and between property and its environment are in balance. Externalities such as the neighborhood and the economy can affect property value positively or negatively.

A systematic, five step procedure for applying the sales comparison approach involves: 1) researching the market for data on the prices of comparable properties, 2) verifying that the data is accurate and representative of arm’s length transactions, 3) determining relevant units of comparison, 4) comparing the subject with the comparables and adjusting the comparables for differences, and 5) reconciling the multiple value indications into a single value or range of values.

In other words, the sales data must also conform to the underlying conditions of the Definition of Market Value as defined by the Office of the Comptroller of the Currency. (i.e., typical motivation, fully informed buyers and sellers, reasonable marketing period, etc.)

The appraiser has collected market data by researching courthouse records, assessment office data and personal data files. Information was also gathered during field inspections and discussions with buyers, sellers, appraisers, brokers and leasing agents. The following is a description of Market Sales Data relied upon in the Sales Comparison Approach. The expenses stated for these comparables include an allowance for replacement reserves.


RIVERSIDE PARK APARTMENTS		70

COMPARABLE SALES DATA — Sales #1-#3


ITEM	COMPARABLE No. 1	COMPARABLE No. 2	COMPARABLE No. 3
Address	Skyline Towers 5597 Seminary Road	Arlington Overlook 1201 S. Scott Street	Ravenwood Towers 6166 Leesburg Pike
Proximity to subj.	Falls Church 4.9 mi.	Arlington 5 mi.	Falls Church 6.8 mi.
Map Code	Sale #1 Fairfax Co.	Sale #2 Arl. Co.	Sale #3 Fairfax Co.
Lot size	12.7 acres	14.38 acres	13.06 acres
Brief description of building improvements	No. Units: 939 No. Vac: 70e Year Built: 1970 A 26-story masonry elevator apartment project w/comm. space.	No. Units: 711 No. Vac: 46 Year Built: 1961 A 9-story elevator apartment project.	No. Units: 310 No. Vac: 11 Year Built: 1962 A 6-story masonry elevator apartment building.
Quality	Average	Average	Average
Condition	Average-Good	Average	Average
Recreational facilities	Fitness center, Clubhouse	Fitness Center, picnic area, playground	Fitness center, tennis courts.
Pool	Swimming pool	Swimming pool	Swimming pool
Parking	Parking garage	Adequate	Adequate
Tenant appeal	Falls Church area of Fairfax Co.	Arlington County location	Fairfax County near Arlington & Alex, VA
Grantor	Fairfield Skyline LLC	Archstone-Smith	Ravenwood Twrs Inc.
Grantee	EQR-Skyline Towers LLC	Fairfield Residential	Fairfield Residential


	No. of		UNIT ROOM COUNT						No. of		UNIT ROOM COUNT						No. of		UNIT ROOM COUNT
	Units		Tot.		BR		b		Units		Tot.		BR		b		Units		Tot.		BR		b
		156		2.5		E		1		168		2		E		1		55		2		E		1
Unit		364		4		1		1		322		3.5		1		1		155		3		1		1
breakdown		52		5		2		1.5		182		4.5		2		1		100		4.5		2		1
		209		5		2		2		32		4.5		2		1.5
		158		6		3		2		7		5.5		3		2


Util. paid by owner	Heat, HW, CG, Sewer	All utilities	All utilities
Data source	Broker, Assmt Records	Buyer, Broker	Buyer, Lender
Price	$165,500,000 þ Unf o F	$90,150,000 þ Unf o F	32,670,000 þ Unf o F
Sale — Listing — Offer	Sale	Sale	Sale
Date of sale	December 2005	August 2004	August 2004
Terms (Including conditions of sale and financing terms)	All cash to the seller. Purchased by Equity Residential, a large Real Estate Investment Trust (REIT). 65% of units have been rehabbed.	All cash to the seller. Buyer plans $13,800,000 in repairs and upgrades.	Buyer to obtain conventional financing.
Possible using data effective at time of sale
Gross Annual Income	$16,193,800	$9,500,000	$4,075,272
Gross Ann. Inc. Mult. (1)	10.2	9.5	8.0
Net Annual Income	$9,000,000	$5,000,000	$1,989,726
Expense Percentage (2)	38.3%	40.1%	44.8%
Overall Cap. Rate (3)	5.4%	5.5%	6.1%
Price per unit	$176,251 incl. Comm.	$126,793	$105,387
Price per room	$40,376	$36,579	$31,873
Price per SF net bldg. area	$160.87/sq. ft. bldg. area	$168.38 /sq. ft. bldg. area	$125.71 /sq. ft. bldg. area
COMMENTS	Economics based on data obtained from listing/ selling broker. Income other than apartment rent totaled $1.537M. This project has over 10,000 SF of comm.	Economics based on actual rent collection and pro forma expenses.	The buyers plan to renovate this building at a cost of about $15,000 per unit. Similar condition.
COMPARISON TO SUBJECT	Superior location. Superior condition. Similar vintage. Much higher avg. rents. Lower exp %. Avg Rent: $1437/mo	Smaller size project. Similar condition. Similar location. Similar average rent. Similar expense %. Avg Rent: $1113/mo	Much smaller project. Older vintage. Similar location. Similar average rent. Higher expense %. Avg Rent: $1096/mo

RIVERSIDE PARK APARTMENTS

COMPARABLE SALES DATA — Sales #4-#6


ITEM	COMPARABLE No. 4	COMPARABLE No. 5	COMPARABLE No. 6
Address	Georgian Towers	Chesterfield House	The Alexandria
	8750 Georgia Avenue	5055 S Chesterfield Road	140 South Van Dorn St.
Proximity to subj.	Silver Spring 14 mi.	Arlington 4.3 mi.	Alexandria 3.9 mi.
Map Code	Sale #4 Mont. Co. MD	Sale #5 Arlington Co.	Sale #6 Alex. City
Lot size	3.25 acres	2.05 acres	40.0785 acres
Brief description	No. Units: 885 No. Vac: 27	No. Units: 101 No. Vac: 5	No. Units: 1524 No. Vac: N/A
of building improvements	Year Built: 1969	Year Built: 1968	Year Built: 1963-67
	A 16-story brick	A 7-story masonry	A 4-6 story elevator
	elevator apartment	elevator apartment	apartment project
	project w/comm space.	project.	with balconies.
Quality	Average	Average	Average
Condition	Average	Average	Average-Good
Recreational facilities	Fitness center, rooftop	None	Fitness Center, tennis,
	sundeck, on-site deli		clubhouse, vball, etc.
Pool	None	Swimming pool	Swimming pools
Parking	Garage parking	127 spaces	Adequate
Tenant appeal	Silver Spring area of	Arlington County	Alexandria City
	Montgomery County	location	near Landmark Mall
Grantor	Watch Holdings LLC	Chesterfld Hse Assoc LP	Sterling Equities
Grantee	Stellar Management	Reserve at Chesterfld LLC	Orion Residential


	No. of		UNIT ROOM COUNT						No. of		UNIT ROOM COUNT						No. of		UNIT ROOM COUNT
	Units		Tot.		BR		b		Units		Tot.		BR		b		Units		Tot.		BR		b
		218		2.5		S		1		6		3		1		1		273		2.5		E		1
Unit		493		3.5		1		1		42		3		1		1		750		4		1		1
breakdown		172		4.5		2		2		48		4		2		1		474		5		2		1-2
		2		5.5		3		2		5	Retail							27		6		3		1.5


Util. paid by owner	All utilities	H&C water, Ht, Ckg	All-1361u; 163u+elec
Data source	Manager, Public Records	Broker, Public Records	Buyer, Public Records
Price	$91,000,000 þ Unf o F	$9,800,000 þ Unf o F	$195,000,000 þ Unf o F
Sale — Listing — Offer	Sale	Sale	Sale
Date of sale	March 2004	November 2004	July 2004
Terms	Purchased by NY- based	Assumed all cash	All cash to the
(Including conditions	investor. Reportedly	to the seller.	seller. Buyer plans
of sale and	part of a 1031 exchange.	Seller was original	upgrades. Subsequent
financing terms)	Recorded price of	owner.	to sale over 300 units
	$89.5M plus $1,500,000		were sold off as
	for immediate capitals.		condominiums.
Possible using data effective at time of sale
Gross Annual Income	$12,170,000 est.	$1,200,000	$21,150,000
Gross Ann. Inc. Mult. (1)	7.5	8.2	9.2
Net Annual Income	$6,600,000	$540,000	$11,700,000
Expense Percentage (2)	40.8%	49.2%	39.7%
Overall Cap. Rate (3)	7.3%	5.5%	6.0%
Price per unit	$102,825	$97,030	$127,953
Price per room	$29,782	$29,167	$33,580
Price gross bldg. area	$103.37 /sq. ft. bldg. area	$108.16 /sq. ft. bldg. area	$170.25 /sq. ft. bldg. area
COMMENTS	Economics based on	Economics based	Most of the units
	rents at time of sale +	on rents at time	at this property have
	commercial & other inc.	of sale and	been renovated.
	NOI estimate obtained	estimated expenses.	Some units were
	from party familiar with		converted to condo.
	transaction. Expenses
	estimated @ $5,600/u.		Superior condition.
COMPARISON	Inferior location.	Similar vintage.	Similar size project.
TO SUBJECT	Similar condition.	Similar condition.	Similar vintage.
	Similar vintage.	Similar location.	Similar location.
	Similar expense %.	Lower average rents.	Slightly higher rents.
	Similar rents.	Much higher expense %.	Similar expense %.
	Avg Rent: $1146/mo	Avg Rent: $990/mo	Avg Rent: $1156/mo


RIVERSIDE PARK APARTMENTS				75

Discussion of the Comparable Sales

The subject’s Market Value is estimated based upon recent sales of comparable apartment properties. The data described in detail on the previous pages was gathered from various sources and confirmed by the parties involved in each transaction. Three of these six properties have been previously appraised by Robert D. Wright, MAI. Due to the variations between properties, these sales have been compared to the subject on the basis of sale price per unit, per room, per square foot of net rentable area and Gross Income Multiplier for an indication of the subject’s value.

Elements of comparison are the characteristics of properties and transactions that cause prices paid for real estate to vary. This appraisal is for the subject’s fee simple title. Although apartment properties are sold subject to leases, the short-term nature of these leases renders the leased fee estate equivalent to the fee simple title. The real property rights conveyed for the comparable properties and the subject are similar.

The subject is being appraised in terms of cash or cash equivalent financing, i.e., conventional mortgage terms available in the market. In the case of the comparable properties, seller financing was not a factor in these transactions. Adjustments for conditions of sale reflect the motivations of the buyer and the seller. None of the sale properties were in distressed circumstances at the time of transfer. No adjustments for conditions of sale were needed.

The Value per Unit and Gross Income Multiplier are most commonly utilized for apartment properties. The Gross Income Multiplier requires no adjustment because it reflects the relationship between each property’s income potential and sale price regardless of time or conditions of sale. The Gross Income Multipliers for the five Northern Virginia sales range from 8.0 to 10.2 and average 9.0. The gross income multipliers reflected by the sales are generally higher for projects with lower expense percentages. The expense percentages for the sales range from 38.3% to 49.2%. It is noted that the expenses estimated for the subject and the expenses of the comparable sales include replacement reserves in this appraisal. The subject’s expense percentage at 40.4% in “As Is” condition prior to rehab is bracketed by the range of expense percentages reflected by the comparable sales.

In consideration of the subject’s relative income and expense characteristics in “As Is” condition prior to renovation, a Gross Income Multiplier of 8.9 is estimated for the subject. With the potential gross income of $16,631,175 and a Gross Income Multiplier of 8.9, the subject’s value indication is $148,017,458 rounded to $148,000,000. The comparable sale prices per unit range from $97,030 to $176,251 for a project with a significant commercial component which skewed the sales price higher (Sale #1 – Skyline Towers). In consideration of the subject’s relative characteristics in “As Is” condition, the estimated market value is $121,000 per unit. This equates to $147,900,000 on a rounded basis. The Gross Income Multiplier and the Value per Unit have been given equal weight herein for a Market Value of $147,900,000 in “As Is” condition prior to rehab assuming stabilized operations.

Georgian Towers (Sale #4) has been included for information but is not directly comparable since it is located in Silver Spring, MD rated inferior to the subject.


RIVERSIDE PARK APARTMENTS			78

Following is a summary of this analysis for the subject assuming “As Is” condition and stabilized operations.

Summary of the Sales Comparison Approach to Value


Property	Subject			Sale #1			Sale #2			Sale #3			Sale #4			Sale #5			Sale #6
							Arlington			Ravenwood			Georgian			Chesterfield			The Alexandria
Project Name	Riverside Park			Skyline Towers			Overlook			Towers			Towers			House
Sale Date		—		Dec-05			Aug-04			Aug-04			Mar-04			Nov-04			Jul-04
Consideration		—		$	165,500,000		$	90,150,000		$	32,670,000		$	91,000,000		$	9,800,000		$	195,000,000
Land Area (acres)		28.171			12.7			14.38			13.06			3.25			2.05			40.0785
Year Built		1971			1970			1961			1962			1969			1968			1963-67
Number of Units		1,222			939			711			310			885			101			1,524
Unit Mix Eff.		18.3	%		16.6	%		23.6	%		17.7	%		24.6	%		0.0	%		17.9	%
1-Bdrm		60.6	%		38.8	%		45.3	%		50.0	%		55.7	%		47.5	%		49.2	%
2-Bdrm		21.0	%		27.8	%		30.1	%		32.3	%		19.4	%		47.5	%		31.1	%
3-Bdrm +		0.0	%		16.8	%		1.0	%		0.0	%		0.2	%		5.0	%		1.8	%
Rent/Unit	$	1,134		$	1,437		$	1,113		$	1,096		$	1,146		$	990		$	1,156
Gross Income	$	16,631,175		$	16,193,800		$	9,500,000		$	4,075,272		$	12,170,000		$	1,200,000		$	21,150,000
Expense %		40.4	%		38.3	%		40.1	%		44.8	%		40.8	%		49.2	%		39.7	%
Net Income	$	8,940,506		$	9,000,000		$	5,000,000		$	1,989,726		$	6,600,000		$	540,000		$	11,700,000
PGIM		—			10.2			9.5			8.0			7.5			8.2			9.2
Overall Rate		—			5.4	%		5.5	%		6.1	%		7.3	%		5.5	%		6.0	%
$/Unit		—		$	176,251		$	126,793		$	105,387		$	102,825		$	97,030		$	127,953

Qualitative Analysis

Property Rights Conveyed

Fee Simple

Conditions of Sale

Similar

Financing Terms

Market

Market Conditions

Similar

Inferior

Economic Characteristics

Superior

Similar

Inferior

Similar

Inferior

Superior

Location

Superior

Similar

Inferior

Similar

Physical Condition

Superior

Similar

Superior

Unit Mix

Superior

Inferior

Superior

Overall Relationship to Subject

Superior

Inferior

Superior


Conclusions per Market Approach
Value Estimate	$	$147,900,000
Unit Value	$	121,031
Potential Gross Income Mult.		8.9

A substantial renovation of the subject is in process. This valuation has estimated the subject’s “As Is” market value prior to renovation in accordance with the client’s request. This appraisal assignment was completed without the benefit of current engineering and environmental site assessment reports. If subsequently completed reports reveal the need for significant immediate repairs or if significant environmentally hazardous conditions exist, this valuation would be adversely impacted.


RIVERSIDE PARK APARTMENTS			79

CORRELATION AND CONCLUSION


Income Approach	$	149,000,000
Sales Comparison Approach	$	147,900,000
Cost Approach	Not Applied

The Cost Approach is not typically relied upon for valuations of older rental projects in this market and has been excluded from this appraisal. An Insurable Value has been included in the addenda.

The Income Approach is ideally suited for estimating the subject’s value since most investors and lenders primarily rely upon this approach for income properties like the subject. This valuation is based on the subject’s economic income potential (“As Is” condition prior to renovation and stabilized occupancy) as supported by current operations and comparable rentals. A detailed rental and expense comparable study is included. This data is considered ample and generally reliable. The subject’s net income was converted into a value indication by direct capitalization utilizing an overall rate developed by the Band of Investment Technique. A value indication was also estimated by directly deriving the overall rate from market sales data. These two methods of deriving a capitalization rate were given consideration in estimating a capitalization rate to be applied against the net income estimate.

The Sales Comparison Approach is based upon an analysis of apartment project sales from Northern Virginia and Montgomery County in Maryland within the subject’s Washington, DC region. The sales prices on a per unit basis and the gross income multipliers were given consideration in this analysis.

The range in value conclusions derived through these indicators was reasonable. Since lenders and buyers for properties like the subject favor the Income Approach it has been given the most weight for the subject’s value conclusion.

ONE HUNDRED FORTY NINE MILLION DOLLARS
($149,000,000)


RIVERSIDE PARK APARTMENTS			80

ESTIMATE OF REASONABLE EXPOSURE TIME

Reasonable Exposure Time is defined in the Uniform Standards of Professional Appraisal Practice as the length of time the property interest being appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market.

Exposure time required for properties in this area is generally impacted by normal market factors such as availability of financing, cash positions of investors, individual property conditions, and the general economic climate. The estimate of reasonable exposure time is that period of time presumed to have occurred prior to the consummation of a sale of the subject property at the value estimate. Based upon conversations with apartment brokers active in this market most stabilized projects are marketed for about 3 to 6 months prior to contracting, another 3 to 6 months passes prior to settlement. This estimate takes into account the desirable nature of the subject’s location and improvements. Competition for properties like the subject would be considerable. While normal exposure time would typically be one year, the good demand for projects like the subject in this market could shorten the exposure time in half.

The estimate of reasonable exposure time is that period of time presumed to have occurred prior to the consummation of a sale of the subject property at the value estimate. Based on the above discussion, the subject’s exposure time would have been 6 to 12 months prior to sale as a rental project.


RIVERSIDE PARK APARTMENTS			81

GENERAL ASSUMPTIONS

1.		The legal description used in this report is assumed to be correct.

2.		No survey of the property has been made by the appraiser and no responsibility is assumed in connection with such matters. Sketches in this report are included only to assist the reader in visualizing the property.

3.		No responsibility is assumed for matters of a legal nature affecting title to the property nor is an opinion of title rendered. The title is assumed to be good and marketable.

4.		Information furnished by others is assumed to be true, correct and reliable. A reasonable effort has been made to verify such information; however, no responsibility for its accuracy is assumed by the appraiser.

5.		All mortgages, liens, encumbrances, leases and servitude have been disregarded unless so specified within the report. The property is appraised as though under responsible ownership and competent management.

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

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

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

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

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


RIVERSIDE PARK APARTMENTS			82

11.

Unless otherwise stated in the report, the existence of radon air pollution or hazardous material, which may or may not be present on the property, was not observed by the appraiser. The appraiser is not qualified to detect such substances. The presence of substances such as asbestos, ureaformaldehyde foam insulation, or other potentially hazardous materials or environmental hazards may affect the value of the property. The value estimate is predicated on the assumption that there is no such material or condition 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. If desired, the client is urged to retain an expert in this field.

LIMITING CONDITIONS

1.		The appraiser will not be required to give testimony or appear in court because of having made this appraisal, with reference to the property in question, unless arrangements have been previously made.

2.		Possession of this report, or a copy thereof, does not carry with it the right of publication. It may not be used for any purpose by any person other than the party to whom it is addressed without the written consent of the appraiser, and in any event only with the proper written qualifications and only in its entirety.

3.		The distribution of the total valuation in this report between land and improvements applies only under the reported highest and best use of the property. The allocations of value for land and improvements must not be used in conjunction with any other appraisal and are invalid if so used.

4.		One (or more) of the signatories of this appraisal report is a member (or candidate) of the Appraisal Institute. The bylaws and regulations of the Institute require each member and candidate to control the use and distribution of each appraisal report signed by such member or candidate. Therefore, except as hereinafter provided, the party for whom this appraisal was prepared may distribute copies of this appraisal report, in its entirety, to such third parties as may be selected by the party for whom this appraisal report was prepared; however, selected portions of this appraisal report shall not be given to third parties without the prior written consent of the signatories of this appraisal report.

5.		In the event that this appraisal contains a valuation of an estate in land that is less than the entire fee simple estate, it is noted that (i) the value reported for such estate relates to a fractional interest only in the real estate involved; and, (ii) the value of this fractional interest plus the value of all other fractional interests may or may not equal the value of the entire fee simple estate considered as a whole.


RIVERSIDE PARK APARTMENTS			83

CERTIFICATION

I certify that, to the best of my knowledge and belief:

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

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

3.		I have no present or prospective interest in the property that is the subject of this report and no personal interest with respect to the parties involved.

4.		I have no bias with respect to the property that is the subject of this report or to the parties involved with the assignment.

5.		My engagement in this assignment was not contingent upon developing or reporting predetermined results.

6.		My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.

7.		My reported analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the requirements of the Code of Professional Ethics & Standards of Professional Appraisal Practice of the Appraisal Institute, which include the Uniform Standards of Professional Appraisal Practice.

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

9.		I have made a personal inspection of the property that is the subject of this report.

10.		No one other than David S. Johnston and Christopher Wright provided significant real property appraisal assistance to the individual signing this report. David S. Johnston and Christopher Wright assisted with the collection and analysis of data and composition of this report.

11.		This appraisal has also been performed in accordance with Freddie Mac appraisal guidelines.

12.		As of the date of this report, Robert D. Wright has completed the continuing education requirements of the Appraisal Institute.


/s/ Robert D. Wright Robert D. Wright, MAI
VA Certified General Real Estate Appraiser
Certification #4001-001391


RIVERSIDE PARK APARTMENTS			84


		Statement of Limiting Conditions and
		Appraiser’s Certification

DEFINITION OF MARKET VALUE: The most probably 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, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as 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 each acting in what he considers his own bet interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and 95) 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.

*Adjustments to the comparables must be made for special or creative financing or sales concessions. No adjustments are necessary for those costs which are normally paid by sellers as a result of tradition or law in a market area; these costs are readily identifiable since the seller pays these costs in virtually all sales transactions. Special or creative financing adjustments can be made to the comparable property by comparisons to financing terms offered by a third Party institutional lender that is not already involved in the property or transaction. Any adjustment should not be calculated on a mechanical dollar for dollar cost of the financing or concession but the dollar amount of any adjustment should approximate the market’s reaction to the financing or concessions based on the appraiser’s judgment.

STATEMENT OF LIMITING CONDITIONS AND APPRAISER’S CERTIFICATION

CONTINGENT AND LIMITING CONDITIONS: The appraiser’s certification that appears in the appraisal report is subject to the following conditions:

1. The appraiser will not be responsible for matters of a legal nature that affect either the property being appraised or the title to it. The appraiser assumes that the title is good and marketable and, therefore, will not render any opinions about the title. The property is appraised on the basis of it being under responsible ownership.

2. The appraiser has provided a sketch in the appraisal report to show approximate dimensions of the improvements and the sketch is included only to assist the reader of the report in visualizing the property and understanding the appraiser’s determination of its size.

3. The appraiser has examined the available flood maps that are provided by the Federal Emergency Management Agency (or other data sources) and has noted in the appraisal report whether the subject site is located in an identified Special Flood Hazard Area. Because the appraiser is not a surveyor, he or she makes no guarantees, express or implied, regarding this determination.

4. The appraiser will not give testimony or appear in court because he or she made an appraisal of the property in question, unless specific arrangements to do so have been made beforehand.

5. The appraiser has estimated the value of the land in the cost approach at its highest and best use and the improvements at their contributory value. These separate valuations of the land and improvements must not be used in conjunction with any other appraisal and are invalid if they are so used.

6. The appraiser has note in the appraisal report any adverse conditions (such as needed repairs, depreciation, the presence of hazardous wastes, toxic substances, etc.) observed during the inspection of the subject property or that he or she became aware of during the normal research involved in performing the appraisal. Unless otherwise stated in the appraisal report, the appraiser has no knowledge of any hidden or unapparent conditions of the property or adverse environmental conditions (including the presence of hazardous wastes, toxic substances, etc.) that would make the property more or less valuable, and has assumed that there are no such conditions and makes no guarantees or warranties, expressed or implied, regarding the condition of the property. The appraiser will not be responsible for any such conditions that do exist or for any engineering or testing that might be required to discover whether such conditions exist. Because the appraiser is not an expert in the field of environmental hazards, the appraisal report must not be considered as an environmental assessment of the property.

7. The appraiser obtained the information, estimates, and opinions that were expressed in the appraisal report from sources that he or she considers to be reliable and believes them to be true and correct. The appraiser does not assume responsibility for the accuracy of such items that were furnished by other parties.

8. The appraiser will not disclose the contents of the appraisal report except as provided for in the Uniform Standards of Professional Appraisal Practice.

9. The appraiser has based his or her appraisal report and valuation conclusion for an appraisal that is subject to satisfactory completion, repairs, or alterations on the assumption that completion of the improvements will be performed in a workmanlike manner.

10. The appraiser must provide his or her prior written consent before the lender/client, specified in the appraisal report can distribute the appraisal report (including conclusions about the property value, the appraiser’s identity and professional designations, and references to any professional appraisal organizations or the firm with which the appraiser is associated) to anyone other than the borrower, the mortgagee or its successors and assigns; the mortgage insurer; consultants; professional appraisal organizations; any state or federally approved financial institution; or any department, agency, or instrumentality of the United States or any state or the District of Columbia; except that the lender/client may distribute the property description section of the report only to data collection or reporting service(s) without, having to obtain the appraiser’s prior written consent. The appraiser’s written consent and approval must also be obtained before the appraisal can be conveyed by anyone to the public through advertising, public relations, news, sales, or other media.


Freddie Mac Form 439 (6/93, 10/98), Page 1 of 2		[Fannie Mae Form 1004B (6/93)]

APPRAISER’S CERTIFICATION: The appraiser certifies and agrees that:

1. I have researched the subject market area and have selected a minimum of three recent sales or properties most Similar and Proximate to the subject property for consideration in the sales comparison analysis and have made a dollar adjustment when appropriate to reflect the market reaction to those items of significant variation, if a significant item in a comparable property is superior to, or more favorable than, the subject property. I have made a negative adjustment to reduce the adjusted sales price of the comparable and, if a significant item in a comparable property is inferior to, or less favorable than the subject property, I have made a positive adjustment to increase the adjusted sales price of the comparable.

2. I have taken into consideration the factors that have an impact on value in my development of the estimate of market value in the appraisal report. I have not knowingly withheld any significant information from the appraisal report and I believe, to the best of my knowledge, that all statements and information in the appraisal report are true and correct.

3. I stated in the appraisal report only my own personal, unbiased, and professional analysis, opinions, and conclusions, which; are subject only to the contingent and limiting conditions specified in this form.

4. I have no present or prospective interest in the property that is the subject to this report, and I have no present or prospective personal interest or bias with respect to the participants in the transaction. I did not base either partially or completely, my analysis and/or the estimate of market value in the appraisal report on the race, color, religion, sex, handicap, familial status, or national origin of either the prospective owners or occupants of the subject property or of the present owners or occupants of the properties in the vicinity of the subject property.

5. I have no present or contemplate future interest in the subject property, and neither my current of future employment nor my compensation for performing this appraisal is contingent on the appraised value of the property.

6. I was not required to report a predetermined value or direction in value that favors the cause of the client or any related party, the amount of the value estimate, the attainment of a specific result, or the occurrence of a subsequent event in order to receive my compensation and for employment for performing the appraisal. I did not base the appraisal report on a requested minimum valuation, a specific valuation, or the need to approve mortgage loan.

7. I performed this appraisal in conformity with the Uniform Standards of Professional Appraisal Practice that were adopted and promulgated by the Appraisal Standards Board of the Appraisal Foundation and that were in place as of the effective date of this appraisal, with the exception of the departure provision of those Standards, which does not apply. I acknowledge that an estimate of a reasonable time for exposure in the open market is a condition in the definition of market value and the estimate I developed is consistent with the marketing time noted in the neighborhood section of this report, unless I have otherwise stated in the reconciliation section.

8. I have personally inspected the interior and exterior areas of the subject property and the exterior of all properties listed as comparables in the appraisal report. I further certify that I have noted any apparent or known adverse conditions in the subject improvements, on the subject site, or on any site within the immediate vicinity of the subject property of which I am aware and have made adjustments for these adverse conditions in my analysis of the property value to the extent that I had market evidence to support them. I have also commented about the effect of the adverse conditions on the marketability of the subject property.

9. I personally prepared all conclusions and opinions about the real estate that were set forth in the appraisal report. No one other than David S. Johnston and Christopher Wright provided significant real property appraisal assistance to the individual signing this certification. David S. Johnston and Christopher Wright assisted with the collection and analysis of data and composition of this report. I certify that any individual so named is qualified to perform the tasks. I have not authorized anyone to make a change to any items in the report; therefore, if an unauthorized change is made to the appraisal report, I will take no responsibility for it.

SUPERVISORY APPRAISER’S CERTIFICATION: If a supervisory appraiser signed the appraisal report, he or she certifies and agrees that: I directly supervise the appraiser who prepared the appraisal report, have reviewed the appraisal report, agree with the statements and conclusions of the appraiser, agree to be bound by the appraiser’s certifications numbered 4 through 7 above, and am taking full responsibility for the appraisal and the appraisal report.


ADDRESS OF PROPERTY APPRAISED:		Riverside Park Apartments
		2000 Huntington Avenue, Alexandria, VA 22303


APPRAISER:		SUPERVISORY APPRAISER (only if required):

Signature:	/s/ Robert D. Wright	Signature:

Name:	Robert D. Wright, MAI	Name:

Date Signed:	June 28, 2006	Date Signed:

State Certification #:	4001 001391	State Certification #:

or State License #:		or State License #:

State:	Virginia	State:

Expiration Date of Certification or License:	02/29/2008	Expiration Date of Certification or License:

		o Did o Did Not Inspect Property


Freddie Mac Form 439 (6/93, 10/98), Page 2 of 2		[Fannie Mae Form 1004B (6/93)]


Scott Kyriakakis		June 28, 2006
Reilly Mortgage Group, Inc.		Page 2 of 2


Rank	Industry	% of Employment
1.	Professional, Scientific and Technical Services	21%
2.	Retail	10%
3.	Health and Social Services	8%
4.	Accommodation and Food Services	7%
5.	Education	7%
6.	Information/Telecommunications	7%
7.	Management and Administrative Services	7%
8.	Construction	6%
9.	Finance and Insurance	4%
10.	Public Administration	4%
11.	Other	18%
	TOTAL	100%