Tender-Offer Statement -- Going-Private Transaction ˇ Schedule 13E-3
Filing Table of Contents
Document/Exhibit Description Pages Size
1: SC 13E3 Tender-Offer Statement -- Going-Private 18 58K
Transaction
2: EX-99.(A) Form of Promissory Note of N'Tandem in Favor Of 4 18K
3: EX-99.(B)(1) Appraisal of Whitcomb Real Estate Inc. 524 1,415K
4: EX-99.(B)(2) Fairness Opinion of Legg Mason Wood Walker, Inc. 3 18K
5: EX-4 Agreement of Limited Partnership 32 168K
6: EX-23.1 Consent of Whitcomb Real Estate Inc. 2 9K
7: EX-23.2 Consent of Legg Mason Wood Walker, Inc. 1 7K
EX-99.(B)(1) ˇ Appraisal of Whitcomb Real Estate Inc.
Exhibit Table of Contents
EXHIBIT 99(b)(1)
Appraisals of Whitcomb Real Estate, Inc.
EXHIBIT (b)(1)(A)
SUMMARY
REAL ESTATE APPRAISAL REPORT
148-Space Ponderosa
3559 Cossell Road
Indianapolis, Indiana
PREPARED FOR
Mr. Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
AS OF
August 5, 1999
PREPARED BY
WHITCOMB REAL ESTATE
[LETTERHEAD OF WHITCOMB REAL ESTATE]
September 30, 1999
Mr. Steve Waite
Windsor Corporation
6430 South Quebec
Englewood, Colorado 80111
RE: 148-Space Ponderosa
3559 Cossell Road
Indianapolis, Indiana
Dear Mr. Waite:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of August 5, 1999, based on an exposure period of six months, to be:
-TWO MILLION TWO HUNDRED THOUSAND DOLLARS -
($2,200,000)
Our value estimate applies to the land as physically constituted, to the
improvements actually in existence and reflects prevailing trends in the local
real estate market. We have made a careful inspection, study, and analysis of
the property, and have considered all factors which, in our opinion, would tend
to influence the market value of the subject.
Ponderosa is a fully developed 148-space manufactured home community, a
maintenance shed, basketball court and a mobile home that is used as an on-site
office.
Our conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation and those specific
conditions indicated in the engagement letter.
This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
We appreciate this opportunity to be of service to you. If you have any
questions, please do not hesitate to contact us.
Mr. Steve Waite
September 30, 1999
Page Two
This is a Summary Appraisal, which is intended to comply with the reporting
requirements set forth under Standards Rule 2-2(b) of the Uniform Standards of
Professional Appraisal Practice for Summary Appraisal Reports. This report
represents only summary discussions of the data, reasoning, and analyses
employed in the appraisal process toward the development of our opinion of
value. Supporting documentation has been retained in our files. The intended
user is Windsor Corporation.
Very truly yours,
/s/ John H. Whitcomb
John H. Whitcomb, MAI, CCIM
St. Cert. Gen. REA #0001234
/s/ Keith D. McFarland
Keith D. McFarland, ASA
Indiana General Certified Appraiser #CG69201433
4
ˇ Download Table
TABLE OF CONTENTS
-----------------
Title Page
Transmittal
Table Of Contents........................................................... 4
Photographs Of Subject...................................................... 5
Summary Of Facts And Conclusions............................................ 6
Extent Of Confirming, Collecting And Reporting Data......................... 7
Purpose, Function, Intended Use And Date Of The Appraisal................... 7
Area And Neighborhood Description........................................... 8
Manufactured Home Community Market Overview................................. 9
Land And Site Improvements.................................................. 10
Improvement Description..................................................... 11
Ownership And Property History.............................................. 11
Occupancy................................................................... 11
Zoning And Other Land Use Controls.......................................... 12
Real Estate Assessment And Taxes............................................ 12
Marketability And Marketing Period.......................................... 13
Highest And Best Use........................................................ 14
Valuation Process........................................................... 14
Income Capitalization Approach.............................................. 15
Sales Comparison Approach................................................... 24
Final Estimate Of Value..................................................... 28
Certification............................................................... 29
Assumptions And Limiting Conditions......................................... 30
Addenda
Legal Description
Maps
Profile Of Appraiser
[PHOTOGRAPHS OF THE SUBJECT (Taken August 5, 1999) 5
[PHOTOGRAPH APPEARS HERE]
1. Entrance to Subject
[PHOTOGRAPH APPEARS HERE]
2. Typical Street View
6
SUMMARY OF FACTS AND CONCLUSIONS
--------------------------------
Property Appraised: 148-Space Ponderosa
------------------- 3559 Cossell Road
Indianapolis, Marion County, Indiana
Property Rights
---------------
Appraised: Fee Simple Interest, subject to
---------- tenant leases
Land Area: Gross land area- 19.47 acres more or less
----------
Improvements: 148-manufactured home spaces, a maintenance
------------- shed, basketball court and a mobile home that
is used as an on-site office.
Owner: Windsor Park Properties 3
------
Zoning: D11, Dwelling District
-------
Highest and Best Use: As Improved -- Current Use
---------------------
Value Indications:
------------------
Income Approach $2,200,000
Sales Comparison Approach $2,300,000
Final Estimate of Value: $2,200,000
------------------------
Date of Appraisal: August 5, 1999
------------------
Date of Inspection: August 5, 1999
-------------------
7
EXTENT OF CONFIRMING, COLLECTING AND REPORTING DATA
---------------------------------------------------
This assignment encompasses providing an "as is" market value of the fee
simple title of the property and improvements, as of the specified date. This
investigation included an overview of the area and local manufactured home
market. We have inspected the subject and its environs, collected and analyzed
market data, inspected the comparable and competitive properties, considered and
applied the appropriate valuation methods and reconciled the final value
estimate. The real estate interest appraised is that of ownership in fee simple
interest, subject to the existing tenant leases. The property is appraised as if
free and clear of mortgages, liens, servitude's and encumbrances, except those
noted in the body of this appraisal.
PURPOSE, FUNCTION, INTENDED USE AND DATE OF THE APPRAISAL
---------------------------------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of August 5, 1999. The information, opinions, and
conclusions contained in this report have been prepared as a basis for portfolio
valuation. The date of this appraisal is August 5, 1999, corresponding with the
physical inspection of the subject. The information, opinions, and conclusions
contained in this report have been prepared as a basis for mortgage financing.
The intended user of the report is Windsor Corporation.
Market Value is defined as: 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:
. Buyer and Seller are typically motivated;
. Both parties are well informed or well advised, and each acting in what
he considers his own best interest;
. A reasonable time is allowed for exposure in the open market;
. Payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
. 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./1/
-------------------------------------
/1/ The Office of the Thrift Supervision, 12 CFR 564.2(f).
8
AREA AND NEIGHBORHOOD DESCRIPTION
---------------------------------
Location/Access
---------------
Pondarosa is located within the central portion of the city of
Indianapolis, Marion County, Indiana, northwest of the Central Business
District. This area is a part of the Indianapolis MSA which also encompasses
Boone, Hamilton, Hancock, Hendricks, Johnson, Morgan and Shelby Counties, and is
situated approximately 185 miles southeast of Chicago, Illinois, 110 miles
northwest of Cincinnati, Ohio and 100 miles northwest of Louisville, Kentucky.
As of 1998, the Indianapolis MSA contained a total population of 1,560,401,
and represents a 13.03 percent increase from 1990. Marion County is the largest
county within the MSA with a estimated 1998 population of 813,405. This
represents a 2.0 percent increase in total population since 1990. The
Indianapolis MSA encompasses 3,089 square miles and has exhibited a singificant
amount of population growth during the past two decades. This growth is
attributed to job growth and attractive cost of living for the surrounding area.
The labor force for the MSA numbered approximately 850,590 in July 1999 and
represents a slight increase from July 1998. As of July 1999, the estimated
unemployment rate stood at 2.0%, and represents a slight decrease from the July
1998 level of 2.9%. In addition, these figures are well below both state and
national unemployment levels. Primary employment sectors include services
(24.1%), wholesale and retail trade (25.1%), manufacturing (15.3%) and
government (13.7%). Major employers include Eli Lilly and Co., Allison
Transmission, Allison Engine and Bank One Indianapolis.
The subject is located along the south side of Cossell Road, east of Tibbs
Avenue. This location is west of the Central Business District and is at the
western edge of Marion County. The neighborhood boundaries are generally
described as Washington Avenue (U.S. Highway 40) to the south, Interstate 465 to
the west, 30th Street to the north and the Central Business District to the
east. Tibbs Avenue extends north south and serves as a primary commercial
street for the city. Cossell Road serves as a residential connector street that
ends to the west and connects to Tibbs Avenue one block east of the subject
property.
The subject is situated in a mature residential, commercial and light
industrial area that is primarily built-up with some new residential development
being noted. Land uses surrounding the subject consist of a small creek
extending along the western boundary of the site with a cemetery and a small
mobile home park being located further west. Abutting the subject to the east
is the Mt. Jackson Cemetery with the closed Central State Hospital; a former
mental institution being located further east. Located to the north is a new
condominium development that was developed by the Indianapolis Housing
Authority. Land uses further north include older single family residences and
commercial buildings with the Indianapolis Speedway being located
Area And Neighborhood Description 9
further north. Located to the south is a mixture of older single family
residences and commercial buildings with both older and newer commercial
developments being located along Washington Avenue. The existing use of the
subject is compatible with surrounding land uses.
Concurrency
-----------
Land uses for the subject's market area are controlled by the Marion County
Planning and Zoning Commission which implements and monitors local comprehensive
and growth management plans. The existing use of the subject is a legal
nonconforming use with local zoning regulations.
Summary
-------
The real estate market in the Indianapolis MSA is strong. The suburban
office, industrial and retail real estate sectors reported decreased vacancy
levels during 1998. The growth demands on the county are very evident in light
of past trends and the projections are for further population increases. The
desirability of this area is evident and is anticipated to continue to increase
as the local economy is forecasted to continue to expand in coming years. The
subject property is situated in an older mature mixed-use residential,
commercial and light industrial area that is built-up and has reflected little
growth during recent years. However, the overall demand for manufactured
housing space is evident within this market and is anticipated to continue.
Based on these factors, real estate values are anticipated to increase barring
any near term economic reversals.
MANUFACTURED HOME COMMUNITY MARKET OVERVIEW
-------------------------------------------
According to the 1998 U.S. Housing Market Map, Indiana ranked 12th among
states in the number of homes shipped in 1998. Shipments have remained
relatively stable over the last three years. Manufactured housing provides a
lower cost-housing alternative to site built homes and a sense of community to
residents. A survey of the subject's market area revealed that several of the
competing manufactured housing communities are currently reflecting occupancy
levels of 61.9% to 100%. The communities surveyed reflected rental rates that
ranged from $192.00 to $245.00 per month with the landlord being responsible for
water, sewer and trash removal. The communities located within the immediate
area are older parks with some newer manufactured home communities being located
further northwest of the subject property. In addition, it was also reported
that there is a significant amount of local opposition regarding the development
of any new manufactured housing communities within Marion County. Therefore, it
is unlikely that overbuilt market conditions will occur within the near future.
The overall demand for manufactured housing sites within this market area is
high and is reflected in the historical occupancy levels of the subject
property.
10
LAND AND SITE IMPROVEMENTS
--------------------------
The site is an irregularly shaped parcel of land containing a gross land
area of 19.47 acres and includes 1.53 acres of additional land that is located
immediately south of the main site (based on public records). The tract is
generally level with a gentle slope to the south and west and is at the
surrounding street grade. A tributary extends along the western boundary of the
site with the subject being protected by a dike to prevent flooding. Drainage
of the tract appears adequate and no adverse soil or subsoil conditions were
observed during the physical inspection of the site. Utility services connected
and in service on the date of valuation include water, sanitary and storm sewer,
electricity and telephone.
The individual lots in the community are accessed by roadways arranged to
maximize the use of the land. Roadway improvements include:
Street-bed: Cossell Road is an asphalt paved, two-lane residential
---------- connector street. The subject streets are asphalt paved
15-25 foot wide roadways.
Sidewalks/Curb: There are sidewalks and curbs along Cossell Road. In
-------------- addition, concrete sidewalks and curbs exist within the
subject.
Street Lights: The public and community streets are lighted with pole
------------- mounted overhead streetlights.
Landscaping: Landscaped areas extend along the perimeter and
----------- throughout the site.
Encumbrances: None Noted
-------------
Easements: Standard utility easements are assumed to exist.
----------
Encroachments: None Noted
--------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded, or otherwise known
liens, defects in title or adverse easements. There are no rent controls in
effect in Marion County.
Functional Utility
------------------
The site, which is irregular in shape and contains a net land area of
approximately 19.47 acres, is large enough to accommodate building improvements
and roadways as well as the playgrounds and green areas. The total developed
land area is approximately 17.94 acres and the current development of total
units equates to an overall density of approximately 8.25 units per
Land and Site Improvements 11
acre, which is higher than current development standards which tend toward
larger lot sizes, wider streets and more green areas.
IMPROVEMENT DESCRIPTION
-----------------------
The subject is improved with 148 manufactured home community pads, arranged
along streets configured to maximize the available lot spaces. All of the lots
vary in size. The community contains two doublewide homes with the remaining
lots being singlewide homesites.
The common area amenities include a basketball court. We have not
estimated a separate value for this amenity, or equipment, as they are standard
items found at most manufactured home communities. This amenity is typical,
adequate and functional in use. The site is also improved with a maintenance
shed and a mobile home that is used as an on-site office.
The community and site improvements were built in 1964, and the community
is approximately 35 years old. The common areas, streets, amenities and
individual mobile homes were observed to be in average overall condition, having
been originally constructed of quality materials and having been maintained over
the years. No significant item of deferred maintenance was noted and the
current maintenance level is rated average.
OWNERSHIP AND PROPERTY HISTORY
------------------------------
The ownership of the subject property, as recorded in the Official Records
of Marion County, is in the name of Windsor Park Properties 3. The property has
been under the same owner ship for several years and is currently not listed for
sale on the open market. Therefore, no sales during the past three years were
noted in our analysis.
OCCUPANCY
---------
The property is occupied by a fully developed 148-space manufactured home
community. Our inspection confirmed that there are seven vacant lots and the
physical occupancy is 95.3%. According to the property manger, the occupancy of
the property has historically been higher than 90%. There is one employee-
occupied home and the economic occupancy is 94.5%.
12
ZONING AND OTHER LAND USE CONTROLS
----------------------------------
The property is zoned as a D-11, Dwelling District under the Marion County
zoning ordinance. It is our opinion that the subject property is a legal
nonconforming use with the zoning code.
Concurrency
-----------
The use of the subject represents a legal nonconforming use with the
approved comprehensive plan filed by Marion County and concurrency is not an
issue.
Flood Hazard
------------
A major portion of the subject property is located in a designated Zone B
Flood Hazard Area according to Flood Map Community Number 180159, Panel 0050B,
dated June 3, 1998. The subject site is protected by a dike to prevent
flooding and no historical flooding problems were noted. Therefore, this
analysis assumes that the location of the subject within this flood plain does
not impact the overall utility of the site.
Environmental
-------------
We observed no obvious areas of contamination on or about the site. This
analysis assumes that no hazardous substances or waste currently exist at the
site and no consideration was given to the potential liabilities and cleanup
costs associated with the presence of these materials. In addition, we have no
qualifications in environmental hazards and recommend an environmental audit be
performed.
REAL ESTATE ASSESSMENT AND TAXES
--------------------------------
The subject property is identified in the Marion County records under
Parcel Numbers 9-011115, 9-044459, 9-044455, 9-010712 and 9-010716. The
assessed value of the subject totals $174,100. It is our opinion that the
subject is under assessed. The 1999 taxes are $14,603.62.
Assessed values, for purposes of property taxation are determined on
January 1, of each year. In the state of Indiana, residential and commercial
properties are assessed at 33 and 1/3% of the market value. According to the
Tax Collector's Office, all taxes are currently delinquent.
13
MARKETABILITY AND MARKETING PERIOD
----------------------------------
The subject is competitive with other properties in the marketplace and is
marketable, although not considered a candidate for a resident purchase.
Discussions with large institutional manufactured home community investor
representatives and local area realtors, indicated that "properly priced",
stable, well kept manufactured home communities should "be under contract"
within a six month period in today's market.
Our discussions further indicated that institutional investors required a
minimum of 200 spaces, and pricing would reflect an 8.5% to 9.5% overall
capitalization rate requirement for all-age communities. Pricing is established
by processing gross income, reduced by a vacancy and credit loss factor,
operating expenses and an additional capital charge based on overall condition,
is deducted to arrive at a net operating income (NOI). Those surveyed indicated
that at properties not operating at stabilized occupancy, they were unwilling to
compensate a seller for any of the upside to be gained in filling the property.
Interest rates are low and financial institutions are again willing to lend
money for real estate projects with good occupancies. There has also been
significant institutional investor interest in manufactured home community
investments. In our opinion, the marketing period for the property would be
within the range indicated by the industry participants or six months.
14
HIGHEST AND BEST USE
--------------------
Highest and Best Use may be defined as: The reasonably probable and legal
use of vacant land or an improved property, which is physically possible,
appropriately supported, financially feasible and which results in the highest
value."/2/
We have considered all of the potential uses to which the subject is
legally and physically adaptable. It is our opinion that the current use of the
subject, as a 148-space, all age manufactured home community, represents the
highest and best use of the subject.
VALUATION PROCESS
-----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject, we have considered the positive
and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Sales Comparison Approach produces an estimate of value through a comparison of
similar properties, which have been transferred in the local market.
In the analysis of a fully occupied manufactured home community, investors
are primarily concerned with cash flow to service any debt and the equity
position. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of mobile homes by
offering low space rental rates, an investor would not be willing to compensate
a seller for any more than the income to be received. The subject is fully
developed with no expansion possibilities, therefore a potential investor would
be primarily interested in the cash flow and equity return and we have excluded
the Cost Approach.
/2/The Appraisal Institute, The Appraisal of Real Estate, 10th Ed. Chicago: The
----------------------------
Appraisal Institute, 1992, page 275.
15
INCOME CAPITALIZATION APPROACH
------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is, of course, an initial
goal. Tempered by capital gains considerations and the potential for recapture
of book depreciation accruals, a seller is often forced to consider a negotiated
price that may include such concessions as interim or permanent financing.
Dictated by market forces, the rate, term, and amount of financing may be
favorable, neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms, and within the goal of price minimization seek:
1. Cash flow relative to capital investment measured either on a pre-
income tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
facility, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property in the market. The first step in the Income Approach
to value involves the estimate of future net operating income to be generated by
the subject property. The estimate of net operating income is derived through
the process of estimating the total potential gross income (PGI from rentals and
other sources, less any vacancy and credit loss producing an effective gross
income (EGI) estimate. All expenses associated with the operation of the
property are then deducted to yield a stabilized net operating income (NOI)
estimate.
A survey of the competitive properties is presented in summary form on the
following page.
RENTAL COMPARABLE SUMMARY
ˇ Enlarge/Download Table
No. Name/Location Number Monthly Services Amenities
Spaces/ Rental Rates Included In Rent
% Occ.
------------------------------------------------------------------------------------------------------------------------------------
1 I-70 Mobile Home Park 80/ $192.00 Water, sewer and trash Playground.
3023 W. Morris Street 92.5% to collection.
Indianapolis, Marion County, Indiana $221.00
------------------------------------------------------------------------------------------------------------------------------------
2 Harrison Mobile Home Park 90/ $210.00 Water, sewer and trash No amenities.
4923 Rockville Road 100.0% collection.
Indianapolis, Marion County, Indiana
------------------------------------------------------------------------------------------------------------------------------------
3 Shrum Mobile Home Park 98/ $215.00 Trash collection. Playground.
3603 Clarks Creek Road 95.9% to
Plainfield, Hendricks County, Indiana $230.00
------------------------------------------------------------------------------------------------------------------------------------
4 Broad Acre Mobile Home Park 210/ $235.00 Water, sewer and trash Playground.
10408 E. County Road 100 N. 61.9% to collection.
Indianapolis, Hendricks County, Indiana $245.00
------------------------------------------------------------------------------------------------------------------------------------
Subj. Ponderosa 148/ $222.00 Water, sewer and trash Playground.
3559 Cossell Road 94.5% collection.
Indianapolis, Marion County, Indiana
===================================================================================================================================
Income Capitalization Approach 17
Income Analysis
---------------
The general market practice is on a base lot rent charged on a monthly
basis. This ranges between $192.00 and $245.00 per month, as indicated by the
rent comparables recited in this report. As shown by our survey, the subject's
lot rents are within the market range.
Potential Gross Income
----------------------
In our forecast of total rental income, we have projected 12 months at the
current rent levels. Based on the current rent roll, the total monthly rent
amounts to $32,856. The potential gross income from rentals is $394,272 per
year.
Vacancy and Credit Loss
-----------------------
The subject is an all age community that has a physical occupancy of 95.3%,
and an economic occupancy of 94.5%. To the economic vacancy, we have added a
percentage to account for credit loss in our estimate of total economic vacancy
of 5.0% of total potential gross income, or $19,714.
Miscellaneous Income
--------------------
Additional income is typically derived from sources such as storage fees,
labor charges to the tenants, commissions on sales and rentals of the units.
Historically, the subject generated $32.97 per space in 1996, $92.09 per space
in 1997 and $113.86 per space in 1998. We have estimated miscellaneous income
at $75.00 per space or $11,100 annually.
Effective Gross Income (EGI)
----------------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated losses due to tenant changes, plus any additional income. Thus,
potential gross rental income of $394,272 less a vacancy and credit loss
allowance of $19,714, or 5.0% produces an effective gross income from rentals
estimate of $374,558. To this amount, we have added an estimated income derived
from miscellaneous sources of $11,100, arriving at an effective gross income
estimate of $385,658.
ˇ Enlarge/Download Table
Income Capitalization Approach 18
====================================================================================================================================
Pondarosa - Historical Income nd Expenses
Pct. of $ Per Pct. of $ Per Pct. of $ Per
1996 Income Space 1997 Income Space 1998 Income Space
------------------------------------------------------------------------------------------------------------------------------------
Income:
Rents $ 332,574 98.55% $ 2,247.12 $ 339,721 96.14% $2,295.41 $ 350,840 95.42% $2,370.54
Miscellaneous/Other 4,879 1.45% 32.97 13,630 3.86% 92.09 16,851 4.58% 113.86
-------------------------------------------------------------------------------------------------------------
Total Income $ 337,453 100.00% $ 2,280.09 $ 353,351 100.00% $2,387.51 $ 367,691 100.00% $2,484.40
Expenses:
Insurance $ 5,326 1.58% $ 35.99 $ 5,708 1.62% $ 38.57 $ 2,182 9.59% $ 14.74
Office/Administration 16,133 4.78% 109.01 8,534 2.42% 57.66 21,618 5.88% 146.07
Maintenance & Repairs 8,446 2.50% 57.07 9,071 2.57% 61.29 13,817 3.76% 93.36
Management Expense 16,545 4.90% 111.79 17,915 5.07% 121.05 18,671 5.08% 126.16
Wages & Benefits 24,032 7.12% 162.38 33,358 9.44% 225.39 37,010 10.07% 250.07
Property Taxes 13,621 4.04% 92.03 12,578 3.56% 84.99 13,936 3.79% 94.16
Utilities 48,066 14.24% 324.77 48,593 13.75% 328.33 60,363 16.42% 407.86
Miscellaneous 9,913 2.94% 66.98 10,683 3.02% 72.18 3,045 0.83% 20.57
-------------------------------------------------------------------------------------------------------------
Total Expenses $ 142,082 42.10% $ 960.01 $ 146,440 41.44% $ 989.46 $170,642 46.41% $1,152.99
Net Operating Income $ 195,371 57.90% $ $ 1,320.07 $ 206,911 58.56% $1,398.05 $197,049 53.59% $1,331.41
====================================================================================================================================
19
Income Capitalization Approach
Operating Expense Analysis
--------------------------
Insurance
---------
Historically, this expense has exhibited a significant decrease from 1997
to 1998. Our estimate of this expense has been based on the historical amounts,
or $15.00 per space per year. This is equal to $2,220 annually, approximately
0.58% of the effective gross income.
Administrative/Office
---------------------
Historically, this expense has shown a stable trend. In the financial
statements, this expense does include some corporate expense items that we have
not considered. Our stabilized estimate is $100.00 per space per year, equal to
$14,800 or approximately 3.84% of the estimated effective gross income.
Maintenance and Repairs
-----------------------
Historically, this expense was equal to $57.07 per space in 1996 and $61.29
per space in 1997. The 1998 figure is slightly higher at $93.36 per space. Our
estimate of $75.00 per space per year is equal to $11,100 and is believed
adequate to properly maintain the community. This amount is equal to
approximately 2.88% of the estimated effective gross income.
Management Fees
---------------
This expense typically includes off-site management, the oversight of the
on-site manager and monthly bookkeeping functions. We used a 5% of estimated
effective gross income, typical in the market place, equal to $19,283 or $130.29
per space per year.
Wages and Benefits
------------------
This expense was equal to $162.38 per space in 1996, $225.39 in 1997 and
$250.07 per space in 1998. We have estimated this expense at $250.00 per space
per year or $37,000, which is equal to 9.59% of the estimated effective gross
income.
Property Taxes
--------------
This category is project specific due to location, and the current taxes
are higher than previous year's levels. Based on our analysis of the historical
tax trends, we have estimated the tax liability to be $14,604. This equates to
$98.68 per space per year or 3.79% of the estimated effective gross income.
20
Income Capitalization Approach
Utilities
---------
This expense was equal to $324.77 per space in 1996 and $328.33 per space
in 1997. The 1998 amount is equal to $407.86 per space. We have estimated this
expense at $410.00 per space per year. This is equal to $60,680, or
approximately 15.73% of the estimated effective gross income.
Miscellaneous
-------------
This expense was equal to $66.98 per space in 1996 and $72.18 per space in
1997. The 1998 amount decreased to $20.57 per space. We have estimated this
expense at $20.00 per space per year. This is equal to $2,960, or approximately
0.77% of the estimated effective gross income.
Reserves
--------
This expense category represents the inclusion of set-asides for major
recurring or capital type expenditures experienced periodically by any property.
We have used $25.00 per space per year, believed adequate to cover future
capital costs. This equates to $3,700 annually or approximately 0.96% of the
estimated effective gross income.
Total Expenses
--------------
To summarize, we have stabilized total operating expenses for the subject
at $166,347. This estimate is equal to 43.13% of the Effective Gross Income
(EGI) estimate or $1,123.97 per space per year. As shown, the 1997 expense was
equal to 41.44% and the 1998 expense was equal to 46.41%.
Income Capitalization Approach 21
===============================================================================
Pondarosa
Stabilized Operating Statement
ˇ Download Table
% of $ per
Amount EGI Space
====================================================================================
Income
Monthly Monthly
Spaces Rent Total Annualized
------------------------------------------------------------------------------------
148 $222.00 32,856 394,272
------------------------------------------------------------------------------------
Gross Potential Rental Income $ 32,856 $394,272
Less:
Vacancy and Credit Loss 5% (19,714)
--------
Effective Gross Income From Rentals $374,558
Plus:
Miscellaneous Income $75.00 11,100
--------
Total Effective Gross Income $385,658 100.00% $2,605.80
Expenses
Insurance $ 2,220 0.58% $ 15.00
Office 14,800 3.84% 100.00
Maintenance & Repairs 11,100 2.88% 75.00
Management Expense 19,283 5.00% 130.29
Wages & Benefits 37,000 9.59% 250.00
Property Taxes 14,604 3.79% 98.68
Utilities 60,680 15.73% 410.00
Miscellaneous 2,960 0.77% 20.00
Reserves 3,700 0.96% 25.00
----------------------------------
Total Expenses $ 166,347 43.13% $1,123.97
Net Operating Income $ 219,311 56.87% $1,481.83
====================================================================================
Income Capitalization Approach 22
Selection of a Capitalization Rate
----------------------------------
Direct capitalization of terminal net operating income by an overall
capitalization rate extracted from the market provides an excellent indication
of market value. Purchasers of manufactured home communities most often utilize
this method. This method is easily understood, closely related to the market,
and convincing if the overall rates abstracted from recent sales are from
comparable sale properties and accurate income data are available.
Market Data
-----------
The comparable sale data indicated an overall capitalization rate between
8.40% and 10.51%. The data indicates a narrow range in overall capitalization
rates, which tend to be influenced by the size of the community, its occupancy,
expense ratio, age and condition, amenity package and location.
ˇ Download Table
Sale Sale Date Vacancy Rate Overall Rate
--------------------------------------------------------------------------------
1 January 1998 3.9% 8.40%
--------------------------------------------------------------------------------
2 August 1997 1.0% 8.78%
--------------------------------------------------------------------------------
3 June 1997 19.9% 8.79%
--------------------------------------------------------------------------------
4 May 1997 1.2% 9.13%
--------------------------------------------------------------------------------
5 April 1997 5.0% 10.51%
--------------------------------------------------------------------------------
In this instance, the subject has an economic vacancy of 5.5% and was
observed to be in average overall condition. The market has been competitive in
recent years, indicating increased risk, increasing the going-in capitalization
rate. Based on these considerations, we have concluded an overall
capitalization rate of 10.0%.
Debt Coverage Ratio Method
--------------------------
We have also developed an overall rate through the Debt Coverage Ratio
analysis. Current commercial lending policies indicate a mortgage loan of 75% of
market value, based on a 20-year amortization schedule at an annual interest
rate of 8.5%, which yields an annual mortgage constant of 10.4139%. A minimum
debt coverage ratio (DCR) of 1.25 to 1.00, would likely be required for a
property similar to the subject. Based on these assumptions an overall
capitalization rate has been developed, as presented below:
ˇ Enlarge/Download Table
M F DCR OAR
X X =
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
----------------------------------------------------------------------------------------------------
0.75 0.104139 1.25 0.097630
----------------------------------------------------------------------------------------------------
Rounded 9.8%
----------------------------------------------------------------------------------------------------
Income Capitalization Approach 23
The Debt Coverage Ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufactured home
community investments has increased, alternate sources of financing have become
available through insurance companies and conduit programs.
The presence of institutional investors in the market and the reduction in
quality of real estate investments has bid down rates on manufactured home
communities. Investors have become more creative in their acquisition
strategies in order to compete. Therefore, actual transactions in the
marketplace better demonstrate investor perceptions of yields on manufactured
home community investments.
We have placed a greater emphasis on the overall capitalization rate
indicated by the market data, as this is a direct reflection of risk perceptions
by market participants, although the rates are almost equivalent. Our estimate
of the market value of the subject, indicated by the Income Capitalization
Approach, is calculated as follows:
ˇ Download Table
Net Operating Income Overall Capitalization Rate Market Value
$219,311 divided by 0.10 $2,193,110
Rounded to $2,200,000
24
SALES COMPARISON APPROACH
-------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions be weighed, and the data of each transaction
be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject be considered;
differences in physical, functional, and economic characteristics be
noted; and adjustments for the differences be made.
3. The value conclusion is consistent with the analysis of the sales
data.
So that a conclusion from the analysis of the sales data can be drawn, a
unit of comparison has been selected. Calculation of a unit of comparison
provides a common denominator by which the market sales can be related to each
other and to the subject property. The commonly accepted unit of comparison in
the valuation of manufactured home communities is the selling price per space.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For dissimilar features adjustments are made
indicating the price at which the subject could be expected to sell. In making
adjustments, all relevant factors were considered including:
1. Nature of surrounding development.
2. Size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
Based on our investigation, the following five sales are the most
significant transactions for direct comparison with the subject.
Summary of Sale Comparables
ˇ Enlarge/Download Table
No. Name/Location Sale Price/ Total Price/ Average E.G.I.M/ O.A.R.
Sale Date Spaces/ Space Lot Rent Expense %
Occupancy
--------------------------------------------------------------------------------------------------------------------------------
1 Oakwood Village Mobile Home Park $7,150,000 284/ $25,176 $262.00 8.33/ 8.40%
10800 Valette Circle January 1998 96.1% 30.0%
Miamisburg, Montgomery County, Ohio
--------------------------------------------------------------------------------------------------------------------------------
2 Heritage Heights $6,500,000 447/ $14,541 $150.00 7.79/ 8.78%
8100 U.S. Highway 31 August 1997 99.0% 30.0%
Taylorsville, Bartholomew County, Indiana
--------------------------------------------------------------------------------------------------------------------------------
3 Westar Mobile Home Park $3,010,000 196/ $15,051 $175.00 7.96/ 8.79%
911 Hale Street June 1997 80.1% 30.0%
Shelbyville, Shelby County, Indiana
--------------------------------------------------------------------------------------------------------------------------------
4 Hollywood Estates Mobile Home Park $3,700,000 242/ $15,289 $175.00 7.66/ 9.13%
2400 Mounds Road May 1997 98.8% 30.0%
Anderson, Madison County, Indiana
--------------------------------------------------------------------------------------------------------------------------------
5 Cottonwood Lane Mobile Home Park $ 650,000 57/ $11,404 $140.00 6.17/ 10.51%
750 N. County Road 225 West April 1997 95.0% 35.0%
Crawfordsville, Montgomery County, Indiana
--------------------------------------------------------------------------------------------------------------------------------
Sales Comparison Approach 26
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. All of the sales were fee
simple transactions, with abnormal financing reflected in the cash equivalent
price. There were no abnormal sale conditions known to have occurred and all of
the sales represent transactions that have taken place over a ten month period,
having traded under similar market conditions.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the effective gross income multiplier (EGIM), in this analysis.
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 6.17 and 8.33. As previously discussed, the EGIM is essentially
a function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases.
The subject has an expense ratio higher than all of the comparables. Based
on this consideration, we have concluded an EGIM slightly below the indicated
range, processing subject's Effective Gross Income of $385,658 with an EGIM of
6.0.
Thus,
$385,658 x 6.0 is $2,313,948
Rounded to $2,300,000
On a per space basis, this is equivalent to $15,541.
Price Per Space Analysis
------------------------
Adjustments, typically considered, are location, age and condition,
occupancy, etc., and are reflected in the income generating capabilities of a
community. A tenant is typically willing, absent other factors, to pay more
rent for a better located, newer community with a greater amenity package.
Rather than making a subjective percentage adjustment to the per space sales
prices, the Net Operating Income/Space (NOI/Space) reflects, in most cases, the
market perception of a property's position in the marketplace. Since investors
are mainly concerned with cash flow to service debt, the net operating income
generating capability of a particular community can be used for comparison
purposes. Typically, the higher the NOI/Space for a community, the higher the
per space sales price. The subject has a NOI/Space of $1,482. The NOI/Space
and per space
Sales Comparison Approach 27
sales prices for the comparables are shown on the following table. We then
compare the percentage difference between each comparable's NOI/Space and the
subject's NOI/Space. For comparables with a higher NOI/Space, a downward
adjustment to the per space sales price is made. An upward adjustment is made
for a comparable with a lower NOI/Space.
NOI/Space and Per Space Sales Price
ˇ Enlarge/Download Table
COMP 1 COMP 2 COMP 3 COMP 4 COMP 5 SUBJECT
----------------------------------------------------------------------------------------------------------------
NOI/Space $ 2,116 $ 1,276 $ 1,323 $ 1,397 $ 1,198 $1,482
Price/Space $25,176 $14,541 $15,051 $15,289 $11,404 N/A
Percent
Adjustment -42.8% 16.1% 12.0% 6.1% 23.7% N/A
Adjusted
Price/Space $14,401 $16,778 $16,857 $16,222 $14,107 N/A
----------------------------------------------------------------------------------------------------------------
After adjustments, the indicated range is from $14,107 to $16,857 per space.
The subject consists of an average quality park in an average location.
Therefore, we have considered the middle of the range and concluded $15,500 per
space.
ˇ Download Table
Thus, 148 Spaces X $15,500/Space is: $ 2,294,000
Rounded $ 2,300,000
SUMMARY
-------
The two methods indicated a narrow range and are considered mutually
supportive. Therefore, we have concluded a value of $2,300,000 via the Sales
Comparison Approach.
28
FINAL ESTIMATE OF VALUE
-----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
ˇ Download Table
Income Capitalization $2,200,000
Approach
Sales Comparison Approach $2,300,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales of similar properties.
In the reconciliation, we reviewed each approach to value (a) to ascertain
the reliability of the data and (b) to weight the approach that best represented
the actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis of
this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the
valuation of the subject property, the sales comparison approach was considered
reliable. Given the relative homogeneity of the locations, the availability of
market data, we have emphasized this approach in the valuation.
The two approaches reflect a narrow range of values. We have placed
primary emphasis on the income capitalization approach. Our opinion of the
market value of the subject, based on a reasonable exposure period of six
months, as of August 5, 1999 was:
- TWO MILLION TWO HUNDRED THOUSAND DOLLARS -
($2,200,000)
29
CERTIFICATION
-------------
I certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. 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.
. I have no bias with respect to the property that is the subject of
this report, or to the parties involved with this assignment.
. My engagement in this assignment was not contingent upon developing or
reporting predetermined results.
. My compensation for completing this assignment is not contingent on
the development or reporting of a predetermined value or direction in
value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a
subsequent event directly related to the intended use of the
appraisal.
. My analysis, opinions, and conclusions were developed, and this report
has been prepared, in conformity with the Uniform Standards of
Professional Appraisal Practice of the Appraisal Foundation, the Code
of Professional Ethics, and the Standards of Professional Practice of
the Appraisal Institute and the American Society of Appraisers.
. The use of this report is subject to the requirements of the Appraisal
Institute and the American Society of Appraisers relating to review by
its duly authorized representatives.
. As of the date of this report, Keith D. McFarland, ASA has completed
the requirements under the continuing education program of the
American Society of Appraisers.
. Keith D. McFarland, ASA has made a personal inspection of the property
that is the subject of this report.
. No one provided significant professional assistance to the person
signing this report.
/s/ Keith D. McFarland
-------------------------------
Keith D. McFarland, ASA
Indiana Certified General Real Estate Appraiser #CG69201433
30
ASSUMPTIONS AND LIMITING CONDITIONS
-----------------------------------
The primary assumptions and limiting conditions pertaining to the conclusion in
this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose, Intended Use and Function of the Report. The appraisal report may not
be reproduced, in whole or in part, and the findings of the report may not be
utilized by a third party for any purpose, without the written consent of
Whitcomb Real Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or to be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes that may be attributed to such considerations.
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
Assumptions and Limiting Conditions 31
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed
concerning any matter that may be disclosed by a proper survey. If a subsequent
survey should reflect a differing land area and/or frontages, we reserve the
right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others, and is not meant for use as a reference in legal matters of
survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projection contained in
the appraisal assumes responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures, which would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made
available to us, so statements regarding soil qualities, if made in the report,
are not conclusive but have been considered consistent with information
available to us and provided by others. In addition, unless stated otherwise in
the appraisal, the land and soil of the area under appraisement appears firm and
solid, but the appraisal does not warrant this condition.
The appraisal report covering the subject is limited to surface rights only, and
does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers and we are not qualified to judge the structural and
environmental integrity of the improvements, if any. Consequently, no warranty,
representations or liability are assumed for the structural soundness, quality,
adequacy or capacities of said improvements and utility services, including the
construction materials, particularly the roof, foundations, and equipment,
including the HVAC systems, if applicable. Should there be any question
concerning
Assumptions and Limiting Conditions 32
them, it is strongly recommended that an Engineering, Construction,
and/or Environmental inspection be obtained. The value estimate stated in this
appraisal, unless otherwise noted, is predicated on the assumption that all of
the improvements, equipment and building services, if any, are structurally
sound and suffer no concealed or latent defects or inadequacies other than those
noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas, which are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal tax or regulatory laws. Therefore, the actual results
achieved during the
Assumptions and Limiting Conditions 33
projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether it is in conformity with the various detailed
requirements of the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the requirements of the ADA,
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
ADDENDA
LEGAL DESCRIPTION
PARCEL III:
PART OF THE SOUTHEAST QUARTER OF SECTION 5, TOWNSHIP 15 NORTH, RANGE 3 EAST IN
MARION COUNTY, STATE OF INDIANA, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEAST CORNER OF SAID QUARTER SECTION; RUNNING THENCE NORTH
02 DEGREES 08 MINUTES 49 SECONDS EAST ALONG THE EAST LINE THEREOF A DISTANCE OF
408.00 FEET TO THE POINT OF BEGINNING OF THE REAL ESTATE DESCRIBED HEREIN;
RUNNING THENCE SOUTH 89 DEGREES 58 MINUTES 22 SECONDS WEST PARALLEL TO THE SOUTH
LINE THEREOF A DISTANCE OF 687.752 FEET; RUNNING THENCE NORTH 25 DEGREES 33
MINUTES 08 SECONDS WEST A DISTANCE OF 213.87 FEET; RUNNING THENCE NORTH 00
DEGREES 02 MINUTES 02 SECONDS WEST A DISTANCE OF 507.000 FEET; RUNNING THENCE
NORTH 12 DEGREES 43 MINUTES 46 SECONDS WEST A DISTANCE OF 950.080 FEET TO A
POINT IN THE CENTERLINE OF COSSELL ROAD; RUNNING THENCE SOUTH 89 DEGREES 56
MINUTES 08 SECONDS EAST UPON AND ALONG SAID CENTERLINE A DISTANCE OF 470.000
FEET; RUNNING THENCE SOUTH 01 DEGREES 46 MINUTES 36 SECONDS WEST A DISTANCE OF
764.48 FEET (SOUTH 766.50 FEET BY DEED); RUNNING THENCE SOUTH 57 DEGREES 21
MINUTES 13 SECONDS EAST A DISTANCE OF 353.369 FEET (SOUTH 63 DEGREES EAST 344
FEET BY DEED); RUNNING THENCE SOUTH 02 DEGREES 12 MINUTES 53 SECONDS WEST A
DISTANCE OF 146.000 FEET; RUNNING THENCE SOUTH 69 DEGREES 22 MINUTES 52 SECONDS
EAST A DISTANCE OF 285.748 FEET (SOUTH 69 DEGREES 45 MINUTES EAST 286.0 FEET BY
DEED) TO A POINT ON THE EAST LINE OF SAID SOUTHEAST QUARTER SECTION; RUNNING
THENCE SOUTH 02 DEGREES 08 MINUTES 49 SECONDS WEST ON AND ALONG SAID EAST LINE A
DISTANCE OF 424.871 FEET TO THE POINT OF BEGINNING.
PARCEL IV:
PART OF BLOCKS 7 AND 8 IN SALEM PARK AS RECORDED IN PLAT BOOK 17, PAGE 150 IN
THE OFFICE OF THE RECORDER OF MARION COUNTY, INDIANA, BEING MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF THE AFOREMENTIONED BLOCK 7, SAID CORNER
ALSO BEING THE SOUTHEAST CORNER OF THE SOUTHEAST QUARTER OF SECTION 5, TOWNSHIP
15 NORTH, RANGE 3 EAST IN MARION COUNTY, INDIANA; RUNNING THENCE NORTH 02
DEGREES 08 MINUTES 49 SECONDS EAST ALONG THE EAST LINE OF SAID BLOCK 7 AND
QUARTER SECTION A DISTANCE 408.000 FEET TO THE NORTHEAST CORNER OF SAID BLOCK 7;
RUNNING THENCE SOUTH 89 DEGREES 58 MINUTES 22 SECONDS WEST ALONG THE NORTH LINE
OF SAID BLOCKS 7 AND 8 AND PARALLEL TO THE SOUTH LINE OF SAID QUARTER SECTION A
DISTANCE OF 687.752 FEET; RUNNING THENCE SOUTH 66 DEGREES 18 MINUTES 35 SECONDS
EAST A DISTANCE OF 56.81 FEET; RUNNING THENCE SOUTH 71 DEGREES 15 MINUTES 01
SECOND EAST A DISTANCE OF 101.76 FEET; RUNNING THENCE SOUTH 67 DEGREES 17
MINUTES 31 SECONDS EAST A DISTANCE OF 178.71 FEET; RUNNING THENCE SOUTH 57
DEGREES 44 MINUTES 16 SECONDS EAST A DISTANCE OF 142.71 FEET; RUNNING THENCE
SOUTH 51 DEGREES 50 MINUTES 31 SECONDS EAST A DISTANCE OF 160.45 FEET; RUNNING
THENCE SOUTH 46 DEGREES 15 MINUTES 31 SECONDS EAST A DISTANCE OF 155.56 FEET TO
THE POINT OF BEGINNING.
MAPS
[MAP APPEARS HERE]
Neighborhood Map
[MAP APPEARS HERE]
Rent Comparable Location Map
[MAP APPEARS HERE]
Comparable Sale Location Map
PROFILE OF APPRAISER
PROFILE OF APPRAISER
KEITH McFARLAND, ASA
REAL ESTATE EXPERIENCE
----------------------
Consultant
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured housing communities, self storage
facilities, hotels, manufacturing plants, office buildings, retail buildings
and other types of commercial establishments as well as special use
facilities. January 1996 to present.
Appraisal Director
Marshall and Stevens, Inc.
St. Louis, MO
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1986 to present.
PROFESSIONAL AFFILIATIONS
-------------------------
ASA, Senior Member American Society of Appraisers
State Certified General Real Estate Appraiser
Arkansas #CG1200N Michigan #1201004617
Colorado #CG80000045 Mississippi #GA-417
Illinois #153000628 Missouri #RA-001461
Indiana #CG69201433 Ohio #398743
Kansas #G-871 Tennessee #00051023
PARTIAL LIST OF CLIENTS AND PROPERTIES
--------------------------------------
Allied Research Associates IBM Retirement Fund
AT&T Global Real Estate Krupp Asset Management Company
Boatmen's National Bank May Company
CalPERS Pacific Realty Corporation
Citicorp Real Estate Park Corporation
Continental Grain Company Ruff, Callahan & Hemmeter
Eastdil Realty Sears
First Tennessee Bank Wal-Mart Stores
2
Profile of Appraiser
EDUCATIONAL BACKGROUND
---------------------
Southern Illinois University at Edwardsville, B.S.
The Appraisal Institute
American Society of Appraisers
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitecomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsiblities included management of all technical staff members
throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing plants,
office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property tax
appeals, financing and allocation of purchase price. March 1990 to May 1992.
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
--------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
--------------------------------------
Manufactured Home Communities
-----------------------------
ˇ Enlarge/Download Table
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
Profile of Appraiser
3
Recreational Vehicle Parks
--------------------------
ˇ Enlarge/Download Table
Avalon RV Park Clearwater, FL Pioneer Creek Bowling Green, FL
Camp Inn Frostproof, FL Rainbow Village Clearwater, FL
Forest Lake Village Zephyrhills, FL Space Coast RV Resort Rockledge, FL
Hide Away Ruskin, FL Sunshine RV Vero Beach, FL
Holiday RV Resort Leesburg, FL Topics Hudson, FL
Horizon RV Park Davenport, FL Twelve Oaks Sanford, FL
Key RV Park Marathon, FL Village Park Orange City, FL
Self-Storage Facilities
-----------------------
Affordable Self Storage Loganville, GA Orange Avenue Tallahassee, FL
Alpine Self Storage Rockford, IL Plantation Xtra Storage Plantation, FL
Baytree Self Storage Valdosta, GA St. Augustine Self Storage St. Augustine, FL
Budget Self Storage Sterling, VA Southern Self Storage Riviera Beach, FL
Delray Mini Storage Delray Beach, FL Storage Express Lauderhill, FL
Edison Lock Up Edison, NJ Valdosta Self Storage Valdosta, GA
Extra Space Lauderhill, FL Xtra Space Orlando, FL
Howell Self Storage Howell, NJ Your Extra Attic Duluth, GA
Hyde Park Storage Tampa, FL Your Extra Attic Norcross, GA
Jacksonville Storage Jacksonville, FL Your Extra Attic Stockbridge, GA
Okeechobee Storage Hialeah Gardens, FL Your Extra Attic Winters Chapel, GA
Hotels/Resorts
--------------
Canyon Ranch in the Berkshires Howard Johnson Maingate
Comfort Inn Kissimmee Hyatt On Union Square
Comfort Suites Asheville Hyatt Orlando
Embassy Suites Boca Raton Hyatt Wilshire
Hotel Nikko San Francisco Hyatt Regency Houston
Hilton Southwest Freeway Houston La Samanna
Hollywood Beach Hilton Ramada Resort Maingate
Holiday Inn Gainesville Westin Washington, D.C.
Profile of Appraiser
Financial
---------
Belgravia Capital Heller Financial
Bloomfield Acceptance Company Household Finance Corporation
Chase Manhattan Bank Irving Leasing Corporation
Chrysler Capital Corporation Mfd. Housing Community Bankers
Citicorp Real Estate Mellon Bank
Collateral Mortgage Morgan Stanley
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Pacificorp Financial Services
First Union Corporation PACTEL Finance
GE Capital Society National Bank
Goldman Sachs Sun America Insurance
Greentree Financial Union Capital
Real Estate/Real Estate Investment
----------------------------------
W.P. Carey & Company, Inc. LaSalle Partners
Chateau Communities Las Colinas Corporation
Continental Communities Metropolitan Life
Delaware North Companies MHC
Dillon Read Real Estate Inc. National Home Communities
Drexel Burnham Lambert Realty, Inc. Pitney Bowes Credit Corp.
First Boston Corporation Salomon Brothers, Inc.
EDUCATIONAL BACKGROUND
----------------------
University of Florida, B.A.
College of William and Mary, M.B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
PUBLICATIONS
------------
Mr. Whitcomb has authored an article on ad valorem taxes and cogeneration
facilities for Cogeneration and Resource Recovery magazine.
----------------------------------
TESTIMONY
---------
Mr. Whitcomb has presented expert testimony in United States Tax Court.
EXHIBIT (b)(1)(B)
SELF-CONTAINED
REAL ESTATE APPRAISAL REPORT
155 Space - The Pines
Manufactured Housing Community
9919 Highway 78
Ladson, South Carolina 29456
PREPARED FOR
Brian Harris
Assistant Vice President
Collateral Mortgage
524 Lorna Square
Birmingham, Alabama 35216
AS OF
June 1, 1999
PREPARED BY
WHITCOMB REAL ESTATE
[LETTERHEAD OF WHITCOMB REAL ESTATE]
June 1, 1999
Brian Harris
Assistant Vice President
Collateral Mortgage
524 Lorna Square
Birmingham, Alabama 3521
RE: 155 Space - The Pines
Manufactured Housing Community
9919 Highway 78
Ladson, South Carolina 29456
Dear Mr. Harris:
At your request, we have inspected and appraised the above captioned
property. We estimate the "as is" market value of the property rights outlined
herein, as of June 1, 1999, based on an exposure period of six months, to be:
- SEVEN HUNDRED THOUSAND DOLLARS -
($700,000)
Our value estimate applies to the land as physically constituted and to the
improvements actually in existence. Our value estimate reflects prevailing
trends in the local real estate market. We have made a careful inspection,
study, and analysis of the property, and have considered all factors which, in
our opinion, would tend to influence the market value of the subject.
The subject was originally developed as an all-age manufactured housing
community with 204 spaces, however, as manufactured homes increased in size,
several lots were overlapped. According to management, there are 19 doubleuse
lots and several lots that are too small to place a home. Additionally, the on-
site manager indicated that the community has only one vacancy out of 155 spaces
usable spaces.
Damon B. Reed
June 1, 1999
Page Two
Management is in the process of obtaining estimates to install individual
water meters. Our estimate of the expense was approximately $100,000. We have
valued the property assuming the residents will be paying for their own
utilities, therefore, the $100,000 meter installation expense was deducted from
the value estimated via the Income Capitalization and Sales Comparison Analyses.
This appraisal assignment was not based on a requested minimum value, specific
value, or the approval of a loan.
This conclusion is premised on the Assumptions and Limiting Conditions as
cited in our attached report, as well as the facts and circumstances as of the
valuation date. This appraisal has been prepared in accordance with the
"Uniform Standards of Professional Appraisal Practice" (USPAP) as published by
the Appraisal Standard Board of the Appraisal Foundation, the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and
Collateral Mortgage Company's Appraisal Guidelines.
We appreciate this opportunity to be of service to you and would like to
thank you for the help and information you provided. If you have any questions,
please feel free to contact us.
Very truly yours,
WHITCOMB REAL ESTATE
L. Drake Moore, MAI
REA#1321098-G
4
TABLE OF CONTENTS
ˇ Download Table
Title Page
Transmittal
Table Of Contents....................................................... 4
INTRODUCTORY SECTION
Photographs Of Subject.................................................. 6
Summary Of Facts And Conclusions........................................ 8
Scope Of The Assignment................................................. 9
Purpose And Function Of The Report...................................... 11
Appraisal Definitions................................................... 11
Property Rights Appraised............................................... 12
Effective Date Of Value................................................. 12
Date Of Inspection...................................................... 12
DESCRIPTIVE SECTION
Area Description........................................................ 14
Neighborhood Description................................................ 22
Manufactured Housing Community Market Overview.......................... 25
Land And Site Improvements.............................................. 33
Improvement Description................................................. 36
Ownership And Property History.......................................... 38
Occupancy............................................................... 38
Zoning And Other Land Use Controls...................................... 39
Assessment And Taxes.................................................... 40
Marketability And Exposure Period....................................... 41
VALUATION SECTION
Highest And Best Use.................................................... 44
Valuation Process....................................................... 49
Income Capitalization Approach.......................................... 50
Sales Comparison Approach............................................... 68
Final Estimate Of Value................................................. 83
Certification........................................................... 84
Assumptions And Limiting Conditions..................................... 85
ADDENDA
Legal Description
Detailed Property Summary
Engagement Letter
Profiles Of Appraisers
INTRODUCTORY SECTION
6
PHOTOGRAPH OF SUBJECT (Taken April 5, 1999)
[PHOTOGRAPH APPEAR HERE]
View of Entry
[PHOTOGRAPH APPEAR HERE]
Typical Interior Street Scene
7
PHOTOGRAPHS OF SUBJECT (Taken April 5, 1999)
[PHOTOGRAPH APPEAR HERE]
View of Office Building
8
SUMMARY OF FACTS AND CONCLUSIONS
--------------------------------
Property Appraised: 155 Space - The Pines
------------------- Manufactured Housing Community
9919 Highway 78
Ladson, South Carolina 29456
Property Rights Appraised: Fee Simple Interest, subject to tenant leases
--------------------------
Land Area: 24.1 gross acres
----------
Improvements: 155 manufactured housing spaces, and office
------------- containing a gross total of approximately 400
square feet. The development also has a playground
and 21 storage sheds.
Owner: Windsor Park Properties
------
Zoning: "RT" Mobile Home Park by Charleston County
-------
Highest and Best Use: As Vacant: Hold for future development as
--------------------- predicated by market demand. As Improved: Current
use (Manufactured Housing Community)
Value Indications: Income Approach $730,000
------------------ Sales Comparison Approach $700,000
Final Estimate of Value: $700,000
------------------------
Date of Appraisal: June 1, 1999
------------------
Date of Inspection: April 5, 1999
-------------------
9
SCOPE OF THE ASSIGNMENT
-----------------------
This assignment encompasses providing an "as is" market value of the fee
simple property rights, subject to tenant leases. The subject is a 155-space
manufactured housing community, known as The Pines, located in Ladson,
Charleston County, South Carolina. The date of the valuation is June 1, 1999.
The first step in the analysis is to develop a concise statement or
definition of the appraisal assignment. This sets the limits of the analysis
and eliminates any ambiguity about the nature of the assignment. This is
accomplished by: 1) identifying the real estate being analyzed, 2) stating the
effective date of value, 3) stating the purpose and use (function) of the
analysis, 4) defining market value, 5) defining and identifying the property
rights to be valued, and 6) stating the assumptions and limiting conditions
applicable to the conclusions.
After defining and accepting the assignment, the preliminary analysis,
which was previously formulated in order to determine the character and extent
of the proposed assignment, is reviewed and refined. The preliminary analysis
also determines the amount of work that will be required to gather the necessary
data. This analysis and work plan are dependent upon the character of the
assignment and the type of property being analyzed. The next step is to make a
physical inspection of the subject, which was accomplished on April 5, 1999, and
its environs, including the gathering of general and specific data.
General data consists of information on the principles, forces and factors
that affect marketability and property value. This information includes
regional and neighborhood trends, as well as social, economic, governmental and
environmental forces that could or may have an effect on the subject's
marketability and value. This general data contributes significantly to the
understanding of the marketplace. Area data for Charleston County and the
subject's immediate neighborhood was obtained from a number of published sources
that are appropriately cited in the report. Based on the data produced through
the research of the general area and neighborhood the initial searches for
market data were extended back to July 1997. As there was adequate data from
which to evaluate the subject property, during that time period, the search was
not further extended or otherwise modified.
Specific data relates to the property being appraised, including a detailed
description of both the parcel comprising the subject site and the subject's
existing site improvements, based upon the physical inspection of the premises
and the neighborhood, together with various documents and drawings obtained from
the owner, management and public services; as well as current and recent changes
in ownership of the subject, occupancy, zoning and land use regulations
affecting the subject, and assessment and real estate tax information applicable
to the subject, obtained from the appropriate governmental agencies. The
gathering of specificdata also relates, as may be applicable, to the comparable
land sales, improved sales and rentals selected. The majority of the market
transactions were originally researched through
Scope of the Assignment 10
the TRW REDI subscription services, which were then visually inspected and
verified with a principle of the transaction, a broker or agent involved in the
transaction and through public records.
In addition to the physical data, locational and income and expense
information for the subject and, as available, for the comparable sales and
rentals was utilized. Also considered are financing arrangements and/or unusual
motivations of either buyer or seller that could or did affect selling prices or
rentals.
An integral part of the valuation process for the property is the
determination of the highest and best use of the subject site: 1) as if vacant,
and 2) as currently improved. The latter analysis is useful in identifying
comparable properties, and determining whether the existing improvements should
be retained, renovated or demolished. The land value estimate, as if vacant, is
required when the land's contribution to total property value is sought, or when
improvements are valued separately, as in the Cost Approach.
After determining the subject site's highest and best use and gathering the
necessary data, we integrate the information drawn from the market research and
analysis of data and consider the application of the three valuation approaches
- the Income Capitalization Approach, the Sales Comparison Approach and the Cost
Approach - in order to derive a well-supported value estimate of the fee simple
interest. Although the three approaches are interrelated, the property type and
use will determine which approach or approaches are most appropriate. Upon
completion of the applicable approaches, we reconcile the value conclusions
derived in order to provide a final value estimate.
11
PURPOSE AND FUNCTION OF THE REPORT
----------------------------------
The purpose of the appraisal is to express our opinion of the "as is"
market value of the fee simple interest, subject to existing tenant leases, of
the real estate, as of June 1, 1999.
The information, opinions, and conclusions contained in this report have
been prepared as a basis for mortgage financing.
APPRAISAL DEFINITIONS
---------------------
Market Value, as defined by the Office of the Comptroller of the Currency
is:
The most probable price which a property should bring in a competitive and
open market under all conditions requisite to a fair sale, the buyer and
seller each acting prudently and knowledgeably, and assuming the price is
not affected by undue stimulus. Implicit in this definition is the
consummation of a sale as of a specified date and passing of title from
seller to buyer under conditions whereby:
- buyer and seller are typically motivated;
- both parties are well informed or well advised and acting in what
they consider their own best interests;
- a reasonable time is allowed for exposure in the open market;
- payment is made in terms of cash in U.S. dollars or in terms of
financial arrangements comparable thereto; and
- 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.
Fee Simple Interest is defined as the absolute ownership unencumbered by
any other interest or estate subject only to the four powers of
government./1/
---------------------
/1/ The Dictionary of Real Estate Appraisal, Third Edition, Appraisal Institute,
1993.
12
PROPERTY RIGHTS APPRAISED
-------------------------
The real estate interest appraised is that of ownership in fee simple
interest, subject to existing tenant leases, and the property is appraised as if
free and clear of mortgages, liens, servitudes and encumbrances, except those
noted in the body of this appraisal.
EFFECTIVE DATE OF VALUE
-----------------------
The effective date of our value is June 1, 1999.
DATE OF INSPECTION
------------------
L. Drake Moore, MAI inspected the property on April 5, 1999.
DESCRIPTIVE SECTION
14
AREA DESCRIPTION
----------------
Introduction
------------
The economic vitality of the surrounding area and the immediate
neighborhood encompassing the subject property is an important consideration in
estimating demand and future cash flow potential of a particular property. The
area description focuses on the social, economic, governmental and environmental
forces that effect real estate.
The first step in estimating the highest and best use of the subject
property is an examination of the social, economic, governmental and
environmental forces affecting property values in the Charleston area. In the
following discussion, we have attempted to present sufficient data to inform
readers unfamiliar with Charleston, South Carolina and its environs.
Introduction
------------
The economic vitality of the surrounding area and the immediate
neighborhood encompassing the subject property is an important consideration in
estimating demand and future cash flow potential of a particular property. The
area description focuses on the social, economic, governmental and environmental
forces that effect real estate. The first step in estimating the highest and
best use of the subject is an examination of the social, economic, governmental
and environmental forces affecting property values in the Charleston-North
Charleston MSA and Berkeley County. In the following discussion, we have
attempted to present sufficient data to inform readers unfamiliar with the
Charleston metropolitan area, Berkeley County and its environs. The subject is
located within the State of South Carolina. South Carolina has a strong economic
base consisting of tourism, services, manufacturing, and retail trade.
State of South Carolina Overview
--------------------------------
The population of South Carolina has been growing steadily since 1992, and
is projected to continue to grow at least through the Year 2000. In 1996, South
Carolina was the 26th largest state in the nation with a population of
3,698,746, but its population growth from 1990 was up 6.1% ranking it 22nd in
population growth over 1990-96. With its 30,111 square miles, population density
as of 1996 was 122.8 persons per square mile, ranking it 22nd in population
density in the country. Regarding the demographic composition of the
population, median age is 32.0 years, which is lower than the median for the
entire U.S. of 33.2 years. As shown in the following table, with the exception
of 1994, the population has grown at close to 1% per year over the past five
years. The rate of growth is projected to increase as shown by the Year 2000
projection. Additional projections show the same rate of growth through the
Year 2015.
Area Description 15
South Carolina State Population Growth and Projections
ˇ Download Table
%
Year Population Change
------------------------------===============
1992 3,594,586 N/A
------------------------------===============
1993 3,628,502 +0.9%
------------------------------===============
1994 3,642,968 +0.4%
------------------------------===============
1995 3,667,000 +0.7%
------------------------------===============
1996 3,698,746 +0.9%
------------------------------===============
2000* 3,914,000 +5.8%
=============================================
Source: 1997 South Carolina Statistical Abstract
*Projection
The rate of future population growth is projected to increase between 1996-
2000 to almost 1.5% per year. The result should be stronger returns on real
estate investments with sufficient demand existing for new construction
projects.
The changing demographics has impacted the South Carolina real estate
market through increasing demand for housing and the corresponding commercial
development that usually follows. Since the recession period of the early
nineties and the financial institution collapse, eastern South Carolina has been
characteristic of the southeastern states with faster than average population,
housing and commercial growth.
Geography
---------
The subject property is located in the city of Ladson within southeastern
South Carolina in Charleston County. Berkeley County immediately borders Ladson
on the west side of U.S. Highway 78. Williamsburg and Georgetown Counties
border the county to the north, Dorchester and Charleston Counties to the south,
Claredon and Orangeburg Counties to the west and Berkeley County to the east.
The city of Charleston is the county seat of Charleston County and the cities of
Hanahan and Goose Creek are the major populated cities in adjacent Berkeley
County. Moncks Corner, the county seat of Berkeley, is approximately 20 miles
north of Hanahan. Charleston is located approximately 105 miles southeast of
Columbia, South Carolina, 195 miles southeast of Charlotte, North Carolina and
290 miles southeast of Atlanta, Georgia.
The Charleston-North Charleston MSA contains a total of 2,591.7 square
miles, with Berkeley County having 1,099.5 square miles (3rd largest in the
state). The range of elevation is 0 to 80 feet above sea level, and its terrain
is largely flat plains. The climate is temperate to subtropical, with average
daily temperatures ranging from 47.9 Fahrenheit (January) to 80.5 (July).
Prevailing winds are out of the west, and average annual rainfall is 52 inches
with very
Area Description 16
infrequent average annual snowfall. This Low Country area of South Carolina is
known for its temperate climate, resort areas and 90 miles of oceanfront.
Population
----------
The Charleston-North Charleston MSA, which includes the counties of
Berkeley, Charleston and Dorchester, had a 1980 population of 430,346, a 1990
population of 506,875 (average of +1.8% per year) and an estimated 1994
population of 522,276 (average of +0.75% per year). There was no data available
for Ladson, but the city of Hanahan in Berkeley County is located only 5 1/2
miles to the southeast and Goose Creek and Berkeley is less than 3 miles to the
east. Both Berkeley and Dorchester Counties grew over the 1990-94 period, while
Charleston County lost population over the same period. Over this same period,
the City of Hanahan lost population. According to the U.S. Census, the City of
Hanahan had a 1990 population of 13,176, a decrease of 0.4% over the 1980 figure
of 13,224. The 1994 population is estimated at 12,886, a decrease of 2.2% over
the 1990 figure. Both the Cities of Charleston and North Charleston gained
population over the 1980-90 period, but lost population over the 1990-94 period.
The Charleston-North Charleston MSA now ranks as the 103rd largest Metropolitan
Statistical Area in the nation, up from 122nd in 1989.
According to the U.S. Census, Charleston County had a 1990 population of
295,039, and the latest estimate of population for Charleston County is 293,550.
Berkeley County had a 1990 population of 128,776, an increase of 35.9% over the
1980 figure of 94,745. The 1997 population was estimated at 141,980 (+7.8% over
1990), with year 2002 population projected to be 152,953, up +7.7% over the next
five years.
Middle aged people make up the largest proportion of the adult aged
population, and continue to become an ever-larger proportion of the population
in Charleston and Berkeley County. The proportion of the population in the 35-
49 year old age group was 23.2% in 1997, compared to 9.4% for 18-24 year olds,
17.8% for 25-34 year olds, and 16.5% for 50 years and older. Further, this age
group has steadily increased over the same period. The surrounding counties
have similar high proportions in this age bracket, including 22.2% for
Charleston County and 24.7% for Dorchester County. The proportion of population
aged 50 years and older is low at 16.5% compared to 22.8% for Charleston County.
In-migration by younger working age population to warmer regions has been a
long-standing trend across the nation. The median age in the City of Hanahan is
30.7 years, with approximately 10% of the town's population being 65 years or
older.
According to Sales & Marketing Management's 1997 Survey of Buying Power,
Berkeley County had households in 1997 totaling 43,500, an increase of 11.5%
over the 1990 U.S. Census figure of 39,023. Year 2002 households are projected
to be 47,800, up +9.9% over the next five years. Over the 1990-2002 period,
average household size is expected to stay constant at 3.26 persons.
Area Description 17
In the Charleston area, the cost of living index for all items is 97.4
below the national average of 100.0, with the cost of living index for housing
at 88.8 well below the national average. The average cost of a 1,800 square
foot 3 bedroom house in the Charleston area is $117,020. The average monthly
rental cost for a 2 bedroom, 2 bath unfurnished apartment is $597 per month plus
electric.
Economy
-------
Professional and related services, trade and manufacturing are the industry
sectors that drive the region's economy. Together, these sectors account for
63.0% of total employment, with the services sector representing 27%, trade
representing 26% and manufacturing representing 10% of employment. The rate of
growth for the new jobs measure the momentum of the labor market, and the
Charleston region ranks 28th in projected future job growth to 2005 among the
nation's 77 metro areas with populations of 500,000 or more.
The following chart lists the top five employers in this region.
ˇ Download Table
REGION'S TOP 5 EMPLOYERS
===============================================================
NAME OF COMPANY EMPLOYEES
---------------------------------------------------------------
Medical University of S. Carolina 7,528
---------------------------------------------------------------
Charleston Air Force Base 6,000
---------------------------------------------------------------
U.S. Navy 5,742
---------------------------------------------------------------
Charleston County School District 5,109
---------------------------------------------------------------
Roper Care Alliance 3,250
===============================================================
According to the South Carolina Employment Security Commission, the total
civilian labor force for the Charleston MSA was 243,960 in 1996. Total
employment was 231,340. Unemployment in the Charleston MSA was 5.2%. This
compares to 1996 unemployment rates for South Carolina of 6.0%, and for the
nation of 5.4%.
While the civilian labor force continues to grow, the military, once a
major employment sector in this region, has been hard hit by base closings and
downsizings. In 1993, the U.S. Navy announced the Charleston Naval Base
closing, and moved submarines and personnel to King's Bay, Georgia or Norfolk,
Virginia. Military personnel were moved out between 1994-96, and the base
officially closed in April 1996. The U.S. Army reoccupied
Area Description 18
a portion of the former naval base with its Combat Asia, the army's pre-combat,
rapid deployment unit.
The U.S. Navy currently has an estimated 5,700 active and civilian
employees at area facilities, including the Naval Weapons Station, Space and
Naval Warfare Systems Center Charleston (SPAWAR), and others. SPAWAR
consolidated personnel from the Maryland-D.C. and Norfolk areas, and handles
engineering, radar and technical operations for the Navy. The Charleston Air
Force Base is home for U.S. Air Force's 437th Airlift Wing and employs 6,000
active and civilian employees. Both of these employment figures are down, and
on-site management as the major factor for increased vacancy at the subject
property over the past several years attributes this.
The U.S. Bureau of Economic Analysis reported per capita income for the
Charleston MSA at $16,919 in 1993, $17,769 in 1994 and $18,840 in 1995, ranking
it 247th out of the nation's 315 MSA's. Per capita income for Berkeley County
was $13,406 in 1993, $13,360 in 1994 and $13,875 in 1995, ranking it 40th out of
the county's 46 municipalities. For 1997, Effective Buying Income (EBI) for the
Charleston MSA was $31,417, with an EBI for Berkeley County of $30,620.
Transportation
--------------
Private automobile use is the predominant means of transportation in the
Charleston region and Berkeley County. The major highways include Interstates
26 and 526 and U.S. Routes 17, 52, 78, 176 and 701. In the vicinity of Hanahan,
U.S. Routes 52/78 and Interstate 26 are the major north-south highways.
Interstate 526 is the primary four-lane expressway providing east-west access
around Charleston to Mt. Pleasant on the east shore of the Cooper River.
Interstate 26 to the west of Hanahan provides direct access to downtown
Charleston to the east and connects with north/south Interstate 95, the main
east coast limited access highway, to the west. There are three Interstate 26
interchanges in the Hanahan area. In the subject's immediate area, North Rhett
Avenue is in the process of being converted from a two-lane road to a five-lane
artery.
There are 41 motor freight carriers with 12 truck terminals servicing the
Charleston area. Delivery time to Chicago and Houston is 3 days; New York and
St. Louis are 4 days each.
Public transportation for Charleston and the suburbs is provided by
Charleston Transit. The Rural Transit Authority provides service for outlying
areas.
Rail freight service is provided by Norfolk Southern and CSX to a variety
of markets. Amtrak provides regional rail passenger transportation.
Area Description 19
The Charleston International Airport, which is located directly west of the
City of Hanahan, serves the commercial aviation needs of the region and Berkeley
County and offers six major airlines, and two commuter lines. Together, these
airlines serve over 1.4 million passengers annually, and offer almost 100
flights daily from this airport. In addition, six local airports, including
Berkeley County airport, throughout the region accommodate both corporate and
private aircraft.
The Port of Charleston is one of the largest container ports on the
Atlantic and Gulf coasts, ranking second behind only the Ports Authority of New
York and New Jersey. The Port is the fourth largest in the entire country
handling over 10 million tons of cargo annually. A recent study conducted for
the South Carolina State Ports Authority estimated that there are 14,900 port-
related jobs in the region generating $2 billion for the local economy. The
Port currently operates four terminals in the region and plans to build a fifth
state-of-the-art facility on a 1,300 acre site on the Daniel Island development
in the City of Charleston.
Tourism
-------
The tourism industry is an important and vital aspect of the regional
economy. Millions of tourists annually visit Charleston's downtown historic
district, surrounding areas, and uncrowded beaches. The economic impact of both
pleasure and business visitors is estimated at $2.3 billion annually, with
visitors spending an average of $126 per person per day. Tourism provides an
estimated 40,000 jobs for area residents.
Recreation & Education
----------------------
The Charleston region has an abundance of state, county and city parks and
several nature centers. Available outdoor activities include all water sports,
sunbathing, shelling, fishing, tennis and golf. The Low Country is filled with
museums, fine arts and performing arts festivals, antique shops, forts,
churches, beach resorts and golf courses. In addition, a wide variety of
cultural events, such as concerts, ballet, theater and opera performances, art
exhibits and museum displays take place throughout the year. Some of the
cultural events include the Low Country Oyster Festival in January, Flowertown
Festival in April, Spoleto Festival USA in May-June, Worldfest-Charleston
International Film Festival in November and Christmas in Charleston in December.
There are 4 public school districts in the Charleston region with an
enrollment of approximately 89,046 students with 132 schools and a pupil/teacher
ratio of 16:1. Berkeley County has 26,672 students in 35 schools with a
pupil/teacher ratio of 18:1. In addition, there are over 100 private and
parochial schools serving the region. College curriculum is available at seven
schools in the Charleston area, including Charleston Southern University, The
Citadel, University of Charleston, Johnson & Wales University, Medical
University of South Carolina, Trident Technical College, and Webster University.
Area Description 20
Conclusion
----------
Most real estate submarkets in Charleston County continue to improve from
the last recession. The population and household figures grew at a strong rate
during the last decade, but are now growing at a slower rate of increase during
the current decade. Projections for the future suggest that this trend will
continue. The development that has occurred emanated from Charleston, North
Charleston and the Interstate 26 corridor. Other than this path of growth, the
county remains largely rural in nature, with the middle age segments of the
population becoming ever larger proportions of the total population. These
trends continue to be projected for the future.
The economic base of the area should broaden due to commitments to attract
clean, light industrial users. Additionally, the population will require more
supporting commercial, service and industrial development throughout the area.
Overall, the near-term future outlook for job growth is strong, except for the
military sector.
Area Map
[MAP APPEARS HERE]
22
NEIGHBORHOOD DESCRIPTION
------------------------
A neighborhood is defined as a portion of a larger community, or an entire
community, containing a homogeneous group of inhabitants, buildings, or business
enterprises.
Location
--------
The two subject property is located on the west side of U.S. Highway 78,
approximately one and 1/2 miles northwest of the College Park Road and
Interstate 26 junction, in the City of Ladson in the northern portion of
Charleston County. The subject is approximately 16 miles north of downtown
Charleston. Except for Hanahan, Goose Creek and Moncks Corner, this area of the
county is largely rural in nature.
Within Ladson the majority of commercial uses are located in the vicinity
of College Park Road, Ladson Road and University Boulevard (U.S. Route 52/78) in
adjoining North Charleston.
Access
------
Access to the neighborhood is rated excellent. The property is accessible
to Interstate 26 via U.S. Highway 78 to the College Park exit, which is
approximately 1.5 miles to the southeast. The access to the property is good
from both directions, as U.S. Highway 78 is a heavily traveled, two-lane
roadway. Visibility is good in both directions along U.S. Highway 78.
Interstate 26 is the primary expressway providing north-south access to downtown
Charleston.
Neighborhood Characteristics
----------------------------
The focus of the commercial activity in the neighborhood has been along
U.S. Highway 78 near University Boulevard. In the immediate area of the subject
property, south of the subject property on the west side of Highway 78, there is
Exchange Club Fairhounds. Residential uses are interspersed. The areas north of
the subject property on either side of Highway 78 are developed with commercial
and residential uses. Ridgewood and Woodside Manor subdivisions are located
north of the subject and to the east is Tall Pines and College Park. Further
south in North Charleston, there is the Northwoods Mall and North Rivers Market.
The Charleston Air Force Base and Charleston International Airport are located
approximately 9 to 10 miles south of the subject. No new mobile home parks have
been constructed in the town over the past several years. Further, none are
being planned or currently under review by the city.
23
NEIGHBORHOOD DESCRIPTION
------------------------
Summary and Conclusion
----------------------
The subject's location in terms of local amenities, shopping, recreational
and activity centers is rated average. The subject's proximity to the area's
major highways, and the excellent access to the subject's immediate area
provided by U.S. Highway 78 and nearby Interstate 26 are positive attributes of
the neighborhood. Being a suburban location in southeastern South Carolina
state, general real estate values have improved over the last three to four year
period for properties purchased during that period. Currently, the manufactured
housing community market is soft due to the downsizing in the military sector.
On the positive side, no new manufactured housing communities are in the
planning or development stages in the City of Ladson.
Neighborhood Map
[MAP APPEARS HERE]
25
MANUFACTURED HOUSING COMMUNITY MARKET OVERVIEW
----------------------------------------------
The manufactured housing industry in the state of South Carolina has
matured over the past twenty years, as a direct result of the advancements in
manufactured housing construction techniques and the continued ability of
producers and dealers to make manufactured housing a relatively inexpensive
housing alternative. Over this period the industry has progressed from it's
original "trailer park" image, to the "mobile home park" and, finally, to its
present status as "a manufactured housing community." This most recent status
is only appropriate, as most manufactured homes are typically moved only once
during their economic lifetime; from the manufacturer's or dealer's lot to the
homesite.
According to the 1996 U.S. Housing Market Map, South Carolina ranked third
among states in the number of homes shipped in 1996. As shown in the table
below, increased in 1994, 1995 and 1996. The 1995 and 1996 statewide figures
show a continued upward trend, with significant increases over the 1994 sales.
ˇ Download Table
1993 to 1996 Manufactured Home Sales
=====================================
YEAR SHIPMENTS
-------------------------------------
1993 13,484
-------------------------------------
1994 15,326
-------------------------------------
1995 19,375
-------------------------------------
1996 22,445
=====================================
Source: South Carolina Manufactured Housing Institute
Unlike some states, such as Florida, Arizona and California, the
manufactured housing market in South Carolina is not well defined. Little
statistical data is available and the housing is typically considered a lower
cost alternative to site built housing. According to the South Carolina
Manufactured Housing Institute, manufactured housing accounted for 26% of new
housing in the state in 1995. Approximately half of the shipments were to
privately owned land rather than a manufactured housing community.
Approximately 40% of the units shipped were doublewide units.
Rental Rates and Occupancy
--------------------------
There is a wide range of rates in the marketplace, based on the location,
project condition, and utilities included in the rent. Generally speaking, a
standard pad ranges between $100.00 per month to $185.00 per month. In some
cases, premiums are also attached to double-wide pads, and these can run between
$20.00 to $25.00 per month above the
26
Manufactured Housing Community Market Overview
standard pad pricing. Services included in the rental rate typically include
trash collection, with some rents including water and sewer. However, most parks
are separately metered. The subject rent ranges from $130.00 to $150.00 per
month, although there are two lots currently renting for $170.00. According to
the manager, the premium rent is based upon the size of the home. In addition,
the resident also pays $20.00 per month for water. Management has started to
schedule the installation of individual meters. According to management, there
are plans to roll back the base rent $20.00 and have the resident will pay their
own utilities. The local market supports the subject's rents; therefore, income
forecasts were based upon current rent levels minus $20.00 for water, sewer and
trash pick-up, or $110.00 to $130.00 per month. With the installation of the
individual meters, the overall reduction would total $40.00.
The current owner last increased the rents at the subject by $10.00 per
space per month effective May 1998. The property manager was not aware of any
pending rent increase. Rents of all-age communities have stabilized as a result
of the weak military sector. Supply has been static for several years and no
large increases are likely until development becomes financially feasible.
Community owners in this region continue to separately meter water and sewer as
a means of increasing profitability in an era of generally stable rents.
The subject was originally developed as an all-age manufactured housing
community with 204 spaces, however, as manufactured homes increased in size,
several lots were overlapped. According to management, there are 19 doubleuse
lots and several lots that are too small to place a home. The community has
only one vacancy out of 155 spaces. The communities that are most competitive
with the subject have been detailed on the following pages. The comparable
communities are fully developed and are currently between 94.2% and 98.5%
occupied. The physical occupancy at the subject is currently 99.4%, with an
economic occupancy rate of 98.7%.
Summary
-------
The manufactured housing market is fragmented in the state of South
Carolina. However, shipments remained fairly constant in the early 1990's, but
are now beginning to increase. Manufactured housing provides a lower cost-
housing alternative to site built homes and a sense of community to residents.
The subject's rents are in line with the market; however, the overall market has
been adversely affected by military downsizing, which has caused vacancy
problems for the marginal communities.
27
Rent Comparable Number 1
Plantation Acres Mobile Home Park
9494 Highway 78
Ladson, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Location: East side of Highway 78, North of Ladson Road.
Number of Spaces: 200
Property Description: All age manufactured housing community built in the
1970's.
Monthly Rental Rates: $160.00 to $185.00
Occupancy: 95.0% (190 of 200)
Services Included in Rates: Water, sewer and trash collection
Amenities: Pool (shared with adjoining campground) and playground.
Verification/Date: Community Manager on April 5, 1999.
Comments: 2 months free rent is being offered. Community is
located adjacent to KOA RV Campsite. No concessions
are offered. The property is a good quality community
in rural location.
ˇ Enlarge/Download Table
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Similar Similar Similar Superior Superior Similar Superior
====================================================================================================================
28
Rent Comparable Number 2
Creekside Mobile Home Park
1925 Bacons Bridge Road
Summerville, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Location: East side of Bacons Bridge Road, West of Dorchester
Road.
Number of Spaces: 325
Property Description: All age manufactured housing community built in 1980's.
Monthly Rental Rates: $175.00 (as of June 1, 1999)
Occupancy: 94.2% (306/325)
Services Included in Rates: Trash collection.
Amenities: Pool, tennis court, basketball and playground.
Verification/Date: Community Manager on April 7, 1999.
Comments: Property is located approximately 4 miles west of the
subject. Rent is to increase from $165.00 to $175.00 as
of June 1, 1999.
ˇ Enlarge/Download Table
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Similar Similar Similar Superior Superior Similar Superior
====================================================================================================================
29
Rent Comparable Number 3
Sineath Estates
9160 Wisteria Street
Ladson, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Location: South side of Wisteria Road, East of Highway 78.
Number of Spaces: 130
Property Description: All age manufactured housing community.
Monthly Rental Rates: $145.00 to $150.00
Occupancy: 98.5% (128/130)
Services Included in Rates: Trash collection.
Amenities: Pool and playground.
Verification/Date: Community Manager on April 7, 1999.
Comments: No recent rent increase. Offering one month free rent.
Average quality community located approximately 1 mile
north of subject.
ˇ Enlarge/Download Table
Location Access Visibility Condition Amenities Home Quality Overall
---------------------------------------------------------------------------------------------------=================
Similar Similar Similar Superior Superior Similar Superior
====================================================================================================================
30
Rent Comparable Number 4
Summercreek
1147 College Park Road
Summerville, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Location: East side of College Park Road, 1/2 Mile South of
Old Summerville Road
Number of Spaces: 148
Property Description: All age manufactured housing community built in
late 1970's.
Monthly Rental Rates: $100.00 to $125.00
Occupancy: 97.3% (144/148)
Services Included in Rates: Trash collection.
Amenities: Exercise room and sauna
Verification/Date: Community Manager on April 10, 1999.
Comments: The property is in fair to poor condition, but has
a inferior location compared to the subject.
ˇ Enlarge/Download Table
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Inferior Inferior Similar Inferior Superior Inferior Inferior
====================================================================================================================
ˇ Enlarge/Download Table
RENTAL COMPARABLE CHART
====================================================================================================================================
NO. OF MONTHLY
SPACES/% RENTAL RATES
NO. NAME/LOCATION occ. SERVICES AMENITIES
------------------------------------------------------------------------------------------------------------------------------------
1 Plantation Acres Mobile Home Park 190/200 $160.00 to Water, sewer and Clubhouse and pool
9494 Highway 78 95% $185.00 trash collection.
Ladson, Charleston County, South Carolina
------------------------------------------------------------------------------------------------------------------------------------
2 Creekside Mobile Home Park 306/325 $175.00 Trash Collection Pool, tennis court, 2
1925 Bacons Bridge Road 94.2% playgrounds and
Summerville, Charleston County, South Carolina basketball court.
------------------------------------------------------------------------------------------------------------------------------------
3 Sineath Estates 128/130 $145.00 to Trash Collection Pool and playground
9160 Wisteria Street 98.5% $150.00
Ladson, Charleston County, South Carolina
------------------------------------------------------------------------------------------------------------------------------------
4 Summercreek 144/148 $100.00 to Trash Collection Exercise room and sauna
1147 College Park Road 97.3% $125.00
Summerville, Charleston County, South Carolina
------------------------------------------------------------------------------------------------------------------------------------
Subj. The Pines 154/155 $150.00 to Water, sewer and Playground
9919 Highway 78 99.4% $170.00 trash collection
Ladson, Charleston County, South Carolina
====================================================================================================================================
Rent Comparable Location Map
[MAP APPEARS HERE]
33
LAND AND SITE IMPROVEMENTS
--------------------------
The subject site is an irregularly shaped parcel of land containing
approximately 24.1 acres, or approximately 1,049,796 square feet of gross area.
The tract is level and at street grade. Drainage of the tract appears adequate.
No adverse soil or subsoil conditions were noted during the physical inspection
of the site.
Utility services connected and in service on the date of valuation include
the following:
Sanitary Sewer: Charleston County
--------------
Storm Sewer: Natural run-off
-----------
Water: Charleston County
-----
Electric: South Carolina Electric and Gas (SCE&G)
--------
Gas: SGE&G
---
Cable Television: Comcast
----------------
Trash Collection: Suburban Disposal
----------------
Ingress to and egress from the subject community is via U.S. Highway 78.
Access is rated excellent. Roadways that are laid-out in a grid pattern to
maximize the natural features of the terrain access the individual lots, in the
community. Roadway improvements include:
Street-bed: U.S. Highway 78 is an asphalt paved, two-lane thoroughfare.
----------
The streets in the community are asphalt-paved roadways and
are 20 to 30-foot wide right-of-ways.
Curb: U.S. Highway 78 has neither curbs nor gutters. The subject
----
has no concrete curbs or gutters.
Sidewalk: There are no sidewalks along U.S. Highway 78. There are
--------
none in the community.
34
Land and Site Improvements
Streetlights: U.S. Highway 78 has no overhead streetlights in this
------------
vicinity. There are pole-mounted lights throughout the
community.
Landscaping: Grass and other planted areas are found throughout the site.
-----------
Some lots have trees.
Arrangements between the subject ownership and municipal and/or public
utility authorities for the connection of telephone and electricity are presumed
to exist, although neither a plan specifically identifying the location of all
underground lines nor contracts providing for their installation were provided
to us.
Encumbrances
------------
Our review of the deed and county property records did not reveal any
adverse or potentially adverse interests that would affect the utility of the
subject property. Specifically, there are no recorded or otherwise known liens,
defects in title or adverse easements. Additionally, there are no rent controls
in effect in Charleston county.
Easements
---------
Standard utility easements for electricity and telephone are assumed to
exist. No other easements were identified to us.
Encroachments
-------------
There were no obvious encroachments observed during the inspection of the
subject and neighboring properties.
Environmental
-------------
There were no obvious areas of contamination on or about the subject site.
We are not qualified in environmental hazards and recommend an audit be
performed.
Functional Utility
------------------
The homesite parcel, which is slightly irregular in shape and contains
approximately 24.1 acres, is large enough to accommodate building improvements
and roadways as well recreational amenities and green areas. The site is
considered functional for various residential development scenarios. The
current development as a 155-space manufactured housing community with an
overall density of approximately 6.43 spaces per acre, is consistent with modern
standards. Therefore, the site is considered functional for use as a
manufactured housing community.
[MAP APPEARS HERE]
36
IMPROVEMENT DESCRIPTION
-----------------------
Although originally configured for 204 spaces, the subject is currently
improved with 155 manufactured housing community pads that are usable. According
to the on-site manager there are 19 doubleuse lots and additional 30 lots that
are unusable. Although she indicated that 4 or 5 lots could be added to the rent
roll if some modifications were made to the existing lots. Other than a
playground there are no on-site amenities. The one-story office building
contains approximately 400 square feet, and there are 21 (8 x 8) and (8 x 10)
storage sheds that are rented to residents.
The community streets are asphalt paved and 20 to 30 feet wide. The
streets were observed to be in average to poor condition.
Age and Condition
-----------------
The subject community and site improvements were originally built in 1972.
The community is approximately 27 years old. The asphalt streets are showing
signs of deferred maintenance, however, overall maintenance levels in the
community are rated good.
THE PINES
MANUFACTURED HOME COMMUNITY
A great community for people who want to enjoy life.
----------------------------------------------------------------------
[MAP APPEARS HERE]
----------------------------------------------------------------------
Single-section and multi-section homesites and
beautiful late model resale homes available.
. Playground . Spacious Homesites
. On-site Professional . Planned Community
Management Activities
[LOGO OF CHATEAU APPEARS HERE]
9919 Highway 78 . Ladson, South Carolina 29456 . (803) 873-6872
38
OWNERSHIP AND PROPERTY HISTORY
------------------------------
The ownership of the subject property, as recorded in the Official Records
of Charleston County, South Carolina is in the name of Windsor Properties.
According to the property owner, the subject is not currently listed for sale or
the subject of a pending contract.
OCCUPANCY
---------
The subject was originally developed with 204 spaces; however, according to
the on-site manager, only 155 spaces are usable. There are currently 154 spaces
occupied including 2 spaces occupied by the manager and a part time maintenance
person. There is currently one space not producing rent. We have incorporated
no income attributable to the sale of homes in our analysis.
Rental rates at the community are $130.00 per month for a regular lot.
Approximately $10.00 to $20.00 is added to the base or regular lot price for a
mulitsectional site. Currently an additional $20.00 in rent is charged for water
and sewer, however, management is arranging for the residents to pay for their
own water and sewer as soon as individual meters are installed. According to
the rent roll, there are 32 sites that rent for $150.00 per month. The last rent
increases occurred in May 1998 and was $10.00 per month. Management is starting
to take bids on installing individual meters. When installed, the tenant would
be responsible for his or her own water and sewer bill and the base rent would
be reduced to $110.00 to $130.00 per month.
39
ZONING AND OTHER LAND USE CONTROLS
----------------------------------
The subject property is located in the City of Ladson and is zoned "RT"
Mobile Home Park. According to the planning department of Charleston County,
the use as a manufactured housing community is permitted as a legal conforming
use in this district. The "RT" district currently specifies a minimum lot depth
of 50 feet, and a front setback of 25 feet.
Flood Hazard
------------
Charleston County is a participant in the Federal Emergency Management
Agency (FEMA) flood map system. According to Flood Map Community Number 455413,
Panel 0125F, dated September 2, 1993, the property is located in a FEMA
designated flood zone "C".
Environmental
-------------
We observed no obvious areas of contamination on or about the site, but
recommend an environmental audit be performed.
40
ASSESSMENT AND TAXES
--------------------
The subject property is identified in the Charleston County records as
parcel number 3881000068, and owned by Windsor Park Properties. According to
records at the Assessor's office, the current (1999) appraised value of the
property is $650,400. The last appraisal was 1996 and the total tax liability
for 1998 was $7,832. According to the Tax Collector's Office, all taxes are
current.
Regarding assessing practice and commercial real property is assessed at 6%
of market values. Tangible personal property is assessed at 10.5%, but taxed at
the real estate tax rate. There is no intangible personal property tax in South
Carolina. According to the Assessor's Office, a reassessment is not planned
until the year 2000. Further, we are informed that properties are not
reassessed as a result of a property sale.
Taxes are based on a January 1 calendar year, and are due without discount
by the January 15th of the following year. Taxes paid after January 15th
through February 1st have a 3% penalty. Taxes paid after February 1st through
March 16th have a 10% penalty. Taxes paid after March 16th have a 15% penalty.
Historically, the tax rates have varied since 1995. The table below
illustrates the tax liability for the subject property since 1996.
ˇ Download Table
Year Total Taxes
==================================================
1998 $7,832.12
==================================================
1997 $7,613.58
==================================================
1996 $7,699.44
==================================================
Historically the taxes have varied, but we would expect some increase in
future years as the demand for governmental service increases. We have forecast
stabilized taxes at $7,832 reflective of the 1998 amount.
41
MARKETABILITY AND EXPOSURE PERIOD
---------------------------------
The subject property as discussed in the Neighborhood Analysis and
Manufactured Housing Community Market Overview sections of this report is
competitive and marketable with other properties in the marketplace.
There are typically four classes of purchasers attracted to this type of
development. The first are the tenants/residents of the community, purchasing on
a cooperative or condominium basis to reduce rental rates. The second class of
purchaser would be the single owner/operator who purchases a community as an
income and investment vehicle. Third would be the "traditional" manufactured
housing community owner/developer who views the community as a safe, long-term
investment. Finally, there is the institutional investor or syndicate (REIT)
which owns several large manufactured housing communities on a
statewide/nationwide basis.
Due to the stability of manufactured housing community investments, the
REIT investors have been a major player in the marketplace. In 1994, REIT
investors bid down capitalization rates for new, large communities. However,
after the initial splash, REIT investments have slackened as property owners
have placed premium prices on their properties. Resident groups have also
increased demand for manufactured housing community investments. According to
our banking sources, resident groups are able to borrow money at debt coverage
ratios as low as 1.0 to 1. The banks view resident group loans as good quality
with minimum risk. Typical payback periods range between five and eight years.
All age communities, like the subject, typically are not candidates for resident
purchase.
Discussions with large institutional manufactured housing community
investor representatives and local area realtors, indicated that "properly
priced", stable, well kept manufactured housing communities should "be under
contract" within a six to eight month period in today's market. However, our
research has also revealed that very few communities are "listed" for sale and
that for the most part brokers solicit owners for buyers.
Our discussions further indicated that institutional investors required a
minimum of 200 spaces, and pricing would reflect an 8.50% to 9.50% overall
capitalization rate requirement for senior communities. All age communities
typically reflect higher capitalization rates due to a less stable occupancy
base. Pricing is established by processing gross income, reduced by a 2% to 3%
vacancy and credit loss factor with expenses of 35% of effective gross income.
An additional capital charge of 3% to 5%, based on overall condition, is
deducted to arrive at a net operating income (NOI). This criteria is generally
the most restrictive pricing, as other investors will tend to accept lower
expense ratios (30%), no capital charges and a lower overall rate.
In early late summer 1998, commercial mortgage backed securities (CMBS)
lenders restructured their pricing for long term fixed rate loans. These loans
had historically been priced
Marketability and Exposure Period 42
based on an interest rate spread above Treasury Securities. The secondary market
for these loans became illiquid and lenders were unable to sell the loans
profitably. Consequently, although interest rates on Treasuries have fallen, the
interest rates on securitized loans have increased. Our discussions with
national lenders indicate that long term, fixed rate loans are still available,
but at a minimum interest rate of 7.25% to 8.0%.
Interest rates are low and financial institutions are again willing to lend
money for existing real estate projects with good occupancies. The presence of
life insurance companiesand conduit programs have made the financing of
manufactured housing communities a very competitive business. The insurance
companies and conduit programs will lend on a non-recourse basis, with terms
ranging from 10 to 20 years.
On the basis of the preceding analysis, in our opinion, the exposure period
for the subject would be within the range indicated by the industry
participants, and we estimate an exposure period of six months.
VALUATION SECTION
44
HIGHEST AND BEST USE
--------------------
Highest and Best Use may be defined as:
"The reasonably probable and legal use of vacant land or an improved
property, which is physically possible, appropriately supported,
financially feasible and which results in the highest value."/2/
The highest and best use of a specific parcel of land does not depend on
subjective analysis by the property owner, the developer, or the appraiser;
rather, the competitive forces within the market where the property is located
shape highest and best use. Therefore, the analysis and interpretation of
highest and best use is an economic study of market forces focused on the
subject property.
Market forces also shape market value. The general data that is collected
and analyzed to estimate property value is also used to formulate an opinion of
the property's highest and best use as of the effective date of the appraisal.
In all valuation assignments, value estimates are based on use. The highest and
best use of a property to be appraised provides the foundation for a thorough
investigation of the competitive positions of buyers and sellers in the
marketplace. Consequently, highest and best use can be described as the
foundation on which market value rests. Without interaction in the marketplace,
highest and best use would not exist and market value estimations would be
impossible.
When potential buyers contemplate purchasing real estate for personal use
or occupancy, their principal motivations are perceived benefits of enhanced
enjoyment, prestige, and privacy. Purchasers of investment property are
frequently motivated by the promise of net income or capital accumulation and
certain tax advantages. These investors are more directly concerned with
feasibility, an indication that a project has a reasonable likelihood of
satisfying their specific objectives. These objectives may include assured
occupancy, establishing operating costs at a reasonable and acceptable level,
and potential property appreciation.
-------------------------
/2/ The Appraisal Institute, The Appraisal of Real Estate, 10th Edition Chicago:
----------------------------
The Appraisal Institute, 1992, page 275.
Highest and Best Use 45
Analysis of the highest and best use of: 1) the land as though vacant, and
2) the property as improved, is essential in the valuation process. Through
highest and best use analysis, we attempt to interpret the market forces that
influence the subject property and identify the use on which the final value
estimate will be based. This determination is based on the analysis and
interpretation of prevailing market conditions, the trends affecting the buyers
and sellers in the marketplace, and the existing use of the subject property.
Analyzing the highest and best use of the land as though vacant serves two
functions. First, it helps identify comparable properties that should have
highest and best uses of the land as though vacant, similar to that of the
subject property. The second reason is to identify the use that would produce
maximum income to the land after property income is allocated to the
improvements. In the Cost Approach and some income capitalization techniques, a
separate value estimate of the land is required. Estimating the land's highest
and best use as though vacant becomes the necessary part of deriving a land
value estimate.
There are also reasons to analyze the highest and best use of the property
as improved. The first is to help identify comparable properties that should
have the same or similar highest and best uses as the improved subject property.
The second is to decide whether the improvements should be demolished, renovated
or retained in their present condition. They should be retained as long as they
have some marketable value and the return from the property exceeds the return
that would be realized by a new use, after deducting the costs of demolishing
the old building and constructing a new one. Identification of the existing
property's most profitable use is crucial to this determination.
The highest and best use of both the land as though vacant and the property
as improved must meet four criteria. The highest and best use must be:
1. Legally Permissible
2. Physically Possible
3. Financially Feasible
4. Maximally Productive
These criteria are usually considered sequentially; a use may be
financially feasible, but this is irrelevant if it is physically impossible or
legally prohibited. Only when there is a reasonable possibility that one of the
prior, unacceptable conditions can be changed is it appropriate to proceed with
the analysis. If, for example, current zoning does not permit a potential
highest and best use, but there is a possibility that the zoning can be changed,
the proposed use can be considered on that basis.
Highest and Best Use 46
Legally Permissible
-------------------
The use must be legal. The use must be probable, not speculative or
conjectural. There must be a profitable demand for such a use and it must return
to the land the highest net return for the longest period of time.
Legal restrictions, as they apply to the subject property, are of two
types, i.e., private restrictions (deed restrictions, easements, etc.) and
public restrictions (zoning, building codes, environmental regulations and
historic district controls, etc.). These latter restrictions must be
investigated, to the best of our ability, because they may preclude many
potential highest and best uses. No information regarding private restrictions
affecting the subject was uncovered in our research or provided by the client.
It is assumed that only common restriction, i.e., utility easements, etc. are
in-place which would not be of any significant consequence to the development of
the site.
If the highest and best use of the site or property is not allowed under
current zoning, but there is a reasonable probability that a change in zoning
could be obtained due to shifting economic and social patterns, these conditions
can be considered determining highest and best use. However, we must fully
disclose all pertinent factors relating to a possible zoning change, including
that the change will not be granted. We must also be sensitive to potential
public reaction to proposed development projects since adverse reactions from
local residents and the general public have stopped many real estate
developments. The existing and/or projected use should be harmonious with the
nature and condition of existing neighborhood development.
The subject is located in an area designated by the Charleston County
Zoning Ordinance as an "RT", Mobile Home Park District. The property, as
constructed, is a special use of the land. The current use of the subject meets
the legally permissible criteria of this analysis.
Physically Possible
-------------------
The second constraint imposed on the possible use of the property is that
dictated by the physical aspects of the site itself. Size, shape and terrain of
the parcel of land affect the uses to which it can be developed. The utility of
the parcel may depend on its frontage and depth. Also considered are the
capacity and availability of public utilities. When a site's topography or
subsoil conditions make development restrictive or costly, its potential use is
adversely affected. In general, the larger the site, the greater the potential
for achieving economies of scale or flexibility in development.
The highest and best use of a property as improved also depends on physical
considerations such as size, design and condition. The condition of the
property and its ability
Highest and Best Use 47
to continue in its current use may be relevant. If the property should be
converted to another use, the cost of conversion must be analyzed in light of
the returns to be generated by the new use. Obviously, the costs of conversion
depend on the property's existing physical condition.
The primary subject site is irregular in shape and contains a total area of
24.1 acres. The site is generally level and has access from U.S. Highway 78. The
size and shape of the site does not restrict maximum flexibility and
development, and the subject's development has made an adequate use of the site
as indicated by its current density of approximately 6.43 spaces per acre.
Financially Feasible
--------------------
After determining which uses are physically possible and legally
permissible, we have eliminated many uses from consideration. Then the uses
that meet the first two criteria are analyzed further to determine which are
likely to produce an income, or return, equal to or greater than the amount
needed to satisfy operating expenses, financial obligations and capital
amortization. All uses that are expected to produce a positive return are
regarded as financially feasible.
To determine financial feasibility, we then estimate the future gross
income that can be expected from each logical highest and best use. Vacancy and
collection losses and operating expenses are then subtracted from each gross
income to obtain the likely net operating income (NOI) from each use. A rate of
return on the invested capital can then be calculated for each use. If the net
revenue capable of being generated is enough to satisfy the required rate of
return on investment and provide a return on the land, the use is financially
feasible within some price limit.
Maximally Productive
--------------------
Of the financially feasible uses, the use that produces the highest price,
or value, consistent with the rate of return warranted by the market for that
use is the highest and best use. To determine the highest and best use of land
as though vacant, the same rate of return is often used to capitalize income
streams from different uses into their respective values. This procedure is
appropriate if all competing uses have similar risk characteristics. If not,
differing rates of return would be required. The use that produces the highest
value is the highest and best use.
To test the highest and best use of land as though vacant or a property as
improved, an appraiser analyzes all logical, feasible alternatives. The market
usually limits the number of property uses to a few logical choices. Each
alternative use must first meet the tests of physical possibility and legal
permissibility. The uses that meet the first two tests are then analyzed to
ascertain how many financially feasible alternatives must be considered.
Highest and Best Use 48
An appraiser must exercise caution in performing market analysis to support
an estimate of highest and best use. Although a given site may be particularly
well suited for a specific use, there may be a number of other sites that are
also well suited, and some may be better suited. Therefore, the appraiser must
test the highest and best conclusion to ensure that existing and potential
competition from other sites has been fully recognized.
Highest and Best Use - Vacant Land
----------------------------------
In determining the highest and best use of the site as vacant, the most
restrictive constraint is the legal use of the site. In the Zoning section of
this appraisal, it was noted that manufactured housing community development of
the property is a legal, specific use of the site.
We have also noted that there are a number of competitive manufactured
housing communities in the subject's neighborhood. Due to the non-availability
of space for immediate manufactured housing community development fees and a
lack of financing for speculative projects, it is unlikely that there will be
speculative manufactured housing community development in the foreseeable
future.
Current trends in the manufactured housing sales would preclude the
development of a manufactured housing community until such time as the market
has improved. In our opinion, the highest and best use of the site, as if
vacant and available for development, would be to hold the property for future
sale as the market trends might predicate.
Highest and Best Use - As Improved
----------------------------------
The site is currently improved with a 155-space all age manufactured
housing community. Although the site was originally developed with 204 spaces,
larger homes have infringed on adjacent lots rendering several lots unusable.
Because of the 50-foot minimum lot width required in a "RT" district and the
increasing size of manufactured homes, the optimum number of lots would appear
to be 155. In addition, the present density of 6.43 units per acre is in line
with modern standards. The present use of the site is a legal conforming use
under the current zoning code. The subject property has been in existence as a
manufactured housing community since 1972.
The site has access via U.S. Highway 78. The use of the site is physically
possible. Some demand for manufactured housing in this area is evident, as the
subject is fully developed and has a high level of occupancy. As evidenced in
the Income Capitalization Approach, the property is capable of providing an
acceptable return to an owner, demonstrating the financial feasibility of the
subject property. The property, as currently improved, is physically possible,
legally permissible, financially feasible and maximally productive. Therefore,
in our opinion, the highest and best use of the property as improved is its
current use as a 155-space all age manufactured housing community.
49
VALUATION PROCESS
-----------------
There are three recognized approaches to the valuation of real property:
Cost; Income; and, Direct Sales Comparison. The appropriateness of each
approach varies with the type and age of the property under examination, as well
as the quantity and quality of applicable market data as of the appraisal date.
In the analyses and appraisal of the subject property, we have considered the
positive and negative aspects of each approach for this specific assignment.
The Cost Approach provides a value indication based on the depreciated cost
of the improvements added to land value. The Income Approach produce an
estimate of value through an economic analysis of the net income derived from
the property and is converted to a capital sum at an appropriate rate. The
Direct Sales Comparison Approach produces an estimate of value through a
comparison of similar properties, which have been transferred in the local
market.
In the analysis of a stabilized manufactured housing community, investors
are primarily concerned with cash flow to service any debt and the equity
positions. While development costs are important for developing communities,
investors assume that these costs are adequately accounted for in rental levels.
In communities where developers have made money on the sale of homes by offering
low space rental rates, an investor would not be willing to compensate a seller
for any more than the income to be received. The subject property is a fully
developed community, with no expansion possibilities; therefore, a potential
investor would be primarily interested in the cash flow and equity return. Due
to the subjectivity of depreciation estimates and the lack of comparable land
sales, we have omitted the cost approach.
A number of positive and negative factors were believed to affect the
overall value of the subject property.
On the positive side, the following were considered.
1. The community rental rate is somewhat below the market levels.
2. The community has a high level of occupancy.
Partially offsetting the positive influences are negative factors among
which the following were considered the most pertinent:
1. Concessions have been offered in the past at the subject property.
With the above factors in mind, the Income Capitalization and Sales
Comparison Approaches will now be discussed in detail on the following pages.
50
INCOME CAPITALIZATION APPROACH
------------------------------
As an introduction to the analysis of the subject it is helpful to identify
the goals and objectives of both buyers and sellers of properties such as the
subject.
From the standpoint of a seller, maximum price is of course an initial goal.
Tempered by capital gains considerations and the potential for recapture of book
depreciation accruals, a seller is often forced to consider a negotiated price
that may include such concessions as interim or permanent financing. Dictated
by market forces, the rate, term, and amount of financing may be favorable,
neutral, or unfavorable with respect to the ultimate selling price.
The purchasers of investment realty naturally prefer to pay a minimum price
subject to terms. Within the goal of price minimization purchasers seek:
1. Cash flow relative to capital investment measured either on a pre-income
tax or post-income tax basis.
2. Minimal capital investment to permit leverage.
3. Equity build-up through mortgage amortization.
4. Sheltered income through accumulation of book depreciation.
5. Capital accumulation through market appreciation.
The relative importance of the above factors to an investor's formula is
difficult to quantify. Institutional investors, speculators, developers,
financial institutions, and syndicators do not uniformly apply the same
investment strategies. Location, property size, tenant mix, age of the
property, absence or presence of long term leases, assignability of existing
debt, condition of the facility, level of occupancy, quality of management, and
other related factors are among the criteria that affect the marketability of an
income-producing property.
Income Capitalization Approach 51
The first step in the Income Approach to value involves the estimate of
future net operating income to be generated by the property. The estimate of
net operating income is derived through the process of estimating the total
potential gross income (PGI), from lot rentals, less any vacancy and credit
loss, added to the estimate of income from other sources, producing an effective
gross income (EGI) estimate. All expenses associated with the operation of the
property are then deducted to yield a stabilized net operating income (NOI)
estimate.
In our estimate of the stabilized net operating income, we have considered
the subject's current rent and expense levels and historical trends, together
with current rent and expense levels at manufactured housing communities similar
to the subject. The subject's historical income and expenses for 1997 and 1998
have been presented, in the table on the following page. It should be noted
that we have grouped a number of expense items for reporting purposes.
Although the expenses do not appear unreasonable, we have also relied on
market comparables. Current income and expense information on three comparable
manufactured housing communities has also been presented in this section.
The data on the tables has been arrayed to display the "percent of total
income" and "dollar per space" figures, consistent with industry reporting
practices. We have combined some of the owners expense categories for purposes
of comparison.
Our analysis of each component of income, vacancy and credit loss and
expenses follows these tables, and has been summarized in the Reconstructed
Operating Statement found on Page 62.
ˇ Enlarge/Download Table
=======================================================================================================================
The Pines Manufactured Housing Summary of Historical Operations
Pct. of $ Per Pct. of $ Per
1997 Income Space 1998 Income Space
-----------------------------------------------------------------------------------------------------------------------
Income:
Rents $216,242 84.32% $1,395.11 $236.981 84.35% $1,528.91
Utility Income 29,159 11.37% $ 188.12 35,580 12.66% $ 229.55
Miscellaneous/Other 11,063 4.31% $ 71.37 8,382 2.98% 54.08
---------------------------------------------------------------------------------------
Total Income $256,464 100.00% $1,654.61 $280,943 100.00% $1,812.54
Expenses:
Insurance 5,700 2.22% 36.77 2,355 0.84% 15.19
Office 35,691 13.92% 230.26 26,335 9.37% 169.90
Maintenance & Supplies 24,663 9.62% 159.12 17,083 6.08% 110.21
Management Expense 12,665 4.94% 81.71 13,612 4.85% 87.82
Wages & Benefits 36,977 14.42% 238.56 44,872 15.97% 289.50
Property Taxes 7,020 2.74% 45.29 7,516 2.68% 48.49
Utilities 149,031 58.11% 961.49 134,882 48.01% 870.21
---------------------------------------------------------------------------------------
Total Expenses $271,747 105.96% $1,753.21 $246,655 87.80% $1,591.32
Net Operating Income -$ 15,283 -5.96% -$ 98.60 $ 34,288 12.20% $ 221.21
=======================================================================================================================
53
Income Capitalization Approach
Income Analysis
---------------
The general practice in the local market is to charge a base lot rent on a
monthly basis. As previously discussed in the Manufactured Housing Community
Market Overview section of this report, this rate at the subject is $110.00 to
$130.00 after reducing the rent $20.00 per month. With the reduction in rent,
the resident is responsible for his or her own water and sewer service. The
premium is charged for 32 large lots, referred to in the rental roll as
"doubleuse" lots.
The base lot rate generally includes no services. Base lot rents typically
generate between 90% and 99% of the total income in a manufactured housing
community. Based on the market range, we are of the opinion that the subject
has a reasonable rent structure within market levels.
Potential Gross Income
----------------------
As any potential purchaser would incorporate a one-year forecast of
potential gross income at the existing rent levels, our analysis must, and has,
also accounted for this. In our forecast of total rental income, we have
projected 12 months at the current rent levels, based on the current rent roll.
The total potential gross income from lot rentals is $212,280.
Vacancy and Credit Loss
-----------------------
Vacancy and credit loss is typically a very small percentage in an
established community, due primarily to the high cost of relocating homes. The
current occupancy at the subject property is 99.3%. All age communities
typically have a more transient occupancy than do senior communities.
Additionally, the subject property has several lots that are considered too
small to lease. As indicated in the Manufactured Housing Overview section of
this report, the subject currently has 154 lots occupied and one vacancy for a
total of 155. Although there are additional lots on the rent roll, management is
not optimistic about leasing them due to the limited size and configuration of
the space. The estimated stabilized vacancy and credit loss at 5.0% to account
for both physical and economic vacancy, and credit loss.
Total vacancy and credit loss has been estimated to be $10,614. The
effective gross income from rentals is estimated to be $201,666.
Utility Income
--------------
Charleston County provides the community water and sewer, and a private vendor
picks up the trash. The landlord currently bills each resident $20.00 per month
for water. Each site will be individually metered and either billed by the
county or management within the next few months. In the past, the community
paid for the water, sewer and trash pickup.
Income Capitalization Approach
54
Water income amounted to $188.12 per space in 1997 and $229.55 in 1998. As
suggested by management, we have reduced the rent eliminated the utility income.
Other Income
------------
Historically the subject has reported miscellaneous income, ranging from
$54.08 per space in 1998 to $71.37 in 1997. This category includes late fees,
bad check charges and other miscellaneous income items. The owner reported that
the late fee charge has been recently increased and a strict policy by
management is in force. We have weighed both the 1997 amount and 1998 amount
equally to estimate miscellaneous income at $60.00 per space or $9,300 per year.
Effective Gross Income
----------------------
Effective Gross Income is derived from income based upon the current
economic rent less a vacancy and credit loss allowance for present and
anticipated income losses due to any tenant changes. Our estimate of the
stabilized effective gross income of $210,966 is detailed below.
ˇ Enlarge/Download Table
============================================================================================
The Pines Manufactured Housing Community
Effective Gross Income
============================================================================================
Gross Potential Rental
Income:
Monthly Monthly
Spaces Rent Total Annualized
-------------------------------------------------------------------------------------------
123 $110.00 13,530 162,360
32 $130.00 4,160 49,920
-------------------------------------------------------------------------------------------
155 $ 17,090 $ 212,280
Less:
Vacancy & Credit Loss 5.0% (10,614)
=================
Effective Gross Income $ 201,666
From Lot Rentals
Utility Income $ -
Miscellaneous Income 9,300
=================
Effective Gross Income $ 210,966
============================================================================================
Income Capitalization Approach
55
Operating Expense Analysis
--------------------------
The following discussion addresses each of the line item expenses for the
property. We have presented 1997 and 1998 amounts, together with the comparable
expense data, followed by our stabilized estimate of the expense.
The comparable expense information has been obtained from a number of
reliable sources and we have presented it in a summary form, on the following
page, to maintain confidentiality. The expense comparables range in size from
130 to 251 spaces. These communities have operations similar to the subject,
including connection to municipal or county utility systems.
ˇ Enlarge/Download Table
===================================================================================================================================
Manufactured Housing Community Comparable Operations
Pct. of $ Per Pct. of $ Per Pct. of $ Per
Spaces 195 Income Space 130 Income Space 251 Income Space
------------------------------------------------------------------------------------------------------------------------------------
Income:
Rents $304,839 97.35% $1,563.28 $341,763 99.44% $2,628.95 $375,664 99.57% $1,496.67
Miscellaneous/Other 8,301 2.65% 42.57 1,923 0.56% 14.79 1,619 0.43% 6.45
------------------------------------------------------------------------------------------------------------
Total Income $313,141 100.00% $1,605.85 $343,686 100.00% $2,643.74 $377,283 100.00% $1,503.12
Expenses:
Insurance $6,733 2.15% $34.53 $2,848 0.83% $21.91 $7,366 1.95% $29.35
Office/Administration 17,845 5.70% 91.51 9,264 2.70% 71.26 29,468 7.81% 117.40
Maintenance & Repairs 33,198 10.60% 170.24 21,766 6.33% 167.43 37,153 9.85% 148.02
Management Expense 3,641 1.16% 18.67 0 0.00% 0.00 5,300 1.40% 21.12
Wages & Benefits 33,590 10.73% 172.26 40,235 11.71% 309.50 29,113 7.72% 115.99
Property Taxes 39,211 12.52% 201.08 23,005 6.69% 176.96 50,000 13.25% 199.20
Utilities 16,996 5.43% 87.16 57,397 16.70% 441.52 24,181 6.41% 96.34
------------------------------------------------------------------------------------------------------------
Total Expenses $151,215 48.29% $775.46 $154,515 44.96% $1,188.58 $182,581 48.39% $727.42
Net Operating Income $161,926 51.71% $830.39 $189,171 55.04% $1,455.16 $194,702 51.61% $775.70
====================================================================================================================================
Spanish Trails Palmetto Sundance
57
Income Capitalization Approach
Insurance
---------
Insurance charges are typically property specific based on the location and
the amenity package. Historically, these charges have varied annually, ranging
from approximately $15.19 per space in 1998 to $36.77 per space in 1997. The
comparable expense data indicated a range from $21.91 to $34.53 per space. We
have placed emphasis on the historical amounts, supported by the comparables.
We have used $25.00 per space in our estimate of this expense. This is equal to
$3,875 annually and represents approximately 1.84% of the estimated effective
gross income.
ˇ Enlarge/Download Table
=============================================================================================
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
---------------------------------------------------------------------------------------------
Total $5,700 $2,355 $6,733 $2,848 $7,366 $3,875
---------------------------------------------------------------------------------------------
% EGI 2.22% 0.84% 2.15% 0.83% 1.95% 1.84%
---------------------------------------------------------------------------------------------
$/Space $36.77 $15.19 $34.53 $21.91 $29.35 $25.00
=============================================================================================
Office/Administration
---------------------
This expense category is also project specific due to varying
classifications of expense categories. We have attempted to include like items
in this category for both the subject and the expense comparables. For the
subject, this category includes office expense, supplies, licenses, dues,
subscriptions, professional fees, postage, advertising and telephone.
Historically, this expense has ranged from $169.90 per space in 1998 to $230.26
per space in 1997. The expense comparables indicated a range for this category
from $71.26 to $117.40 per space. We have relied primarily on the historical
data, with consideration of the comparables. We have estimated the
administrative/office expense at $140.00 per space or $21,700 per year. This
estimate is equal the equivalent of 10.29% of the effective gross income
estimate.
ˇ Enlarge/Download Table
=============================================================================================
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
---------------------------------------------------------------------------------------------
Total $36,691 $26,335 $17,845 $9,264 $29,468 $21,700
---------------------------------------------------------------------------------------------
% EGI 13.92% 9.37% 5.70% 2.70% 7.81% 10.29%
---------------------------------------------------------------------------------------------
$/Space $230.26 $169.90 $ 91.51 $71.26 $117.40 $140.00
=============================================================================================
58
Income Capitalization Approach
Maintenance and Supplies
------------------------
These expenses are project specific based on the age and condition of the
property. Many properties expense capital items rather than capitalizing them,
which results in abnormal spikes in the expense amounts in certain years.
Historically, maintenance and repair expenses have ranged from $110.21 per
space in 1998 to $159.12 in 1997. We observed the community to be in average
condition. As the community continues to age additional maintenance efforts will
be necessary. The expense comparables indicate a wide range of expense in this
category from $148.02 per space to $170.24 per space. Our stabilized estimate
of this expense is $120.00 per space or $18,600 annually, based primarily on the
historical data. This estimate is equal to approximately 8.82% percent of the
estimated effective gross income.
ˇ Enlarge/Download Table
=============================================================================================
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
---------------------------------------------------------------------------------------------
Total $24,663 $17,083 $33,198 $21,766 $37,153 $18,600
---------------------------------------------------------------------------------------------
% EGI 9.62% 6.08% 10.60% 6.33% 9.85% 8.82%
---------------------------------------------------------------------------------------------
$/Space $159.12 $110.21 $170.24 $167.43 $148.02 $120.00
=============================================================================================
Management Fee
--------------
Management fees are charged at two of the expense comparables and were
equal to 1.16% and 1.40%. The subject management fees ranged from 4.85% in 1998
to 4.94% in 1997. The market range for management fees was found to range from
approximately 3.0% to 5.0% of effective gross income.
We have estimated a fee of 5.0% of effective gross income, considered
adequate for the management of a property of this size, in this location.
Applying this percentage to the effective gross income estimate produces an
annual amount of $10,548 or $68.05 per space per year.
59
Income Capitalization Approach
Wages and Benefits
------------------
This expense includes all of the costs associated with the on-site staff.
These costs including payroll, payroll and unemployment taxes and any health
insurance benefit package. At the subject, the expenses attributed to on-site
management and maintenance range from $238.56 per space for 1997 to $289.50 per
space in 1998. The on-site manager, assistant manager and part-time maintenance
man receive free rent as part of their compensation package.
The expense comparables indicate a wide range of expense in this category
from $115.99 per space to $309.50 per space. Our estimate of this expense has
been based primarily on the historical data. Our estimate of $290.00 per space,
is equal to $44,950 annually or 21.31% of the estimated effective gross income.
Our estimate appears to be within the market range regardless of the free rent.
ˇ Enlarge/Download Table
=============================================================================================
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
---------------------------------------------------------------------------------------------
Total $36,977 $44,872 $33,590 $40,235 $29,113 $44,950
---------------------------------------------------------------------------------------------
% EGI 14.42% 15.97% 10.73% 11.71% 7.72% 21.31%
---------------------------------------------------------------------------------------------
$/Space $238.56 $289.50 $172.26 $309.50 $115.99 $290.00
=============================================================================================
Property Taxes
--------------
This category of expense represents the annual real estate tax liability of
the property. This category is project specific due to location and taxing
authority. We have not used the expense comparables for the estimate this
expense.
In our analysis we have relied on the analysis as presented and discussed
in the Assessment and Taxes section of this report. Our analysis indicated a
tax liability of $7,832. This estimate is equal to $50.53 per space or 3.71% of
the effective gross income estimate.
60
Income Capitalization Approach
Utilities
---------
This category of expense is also project specific, due to the number and
type of services that are included in the rent. In this case, this line item
includes the costs of providing water and trash pick-up for the homesites and
water, sewer, electric and trash collection for the common areas of the
community. Only one of the expense comparables provides utilities in the base
rent. Typically, utilities are passed through to the tenant. The comparables,
as shown below, indicate a wide range from $87.16 to $441.52 per space. The
subject's utility expense appears to be excessively high when compared to other
communities. The manager indicated that there was no incentive for the
residents to conserve water. We have valued the subject property based upon the
assumption that resident will pay their own utilities. The cost of installing
the meters was deducted from our estimated value to arrive at an "as is" value.
We have estimated the utility expense at $100.00 per space or $15,500 annually.
This is equivalent to 7.35% of the effective gross income estimate.
ˇ Enlarge/Download Table
=============================================================================================
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
---------------------------------------------------------------------------------------------
Total $149,031 $134,882 $16,996 $57,397 $24,181 $15,500
---------------------------------------------------------------------------------------------
% EGI 58.11% 48.01% 5.43% 16.70% 6.41% 7.35%
---------------------------------------------------------------------------------------------
$/Space $961.49 $870.21 $ 87.16 $441.52 $ 96.34 $100.00
=============================================================================================
Reserves
--------
Property owners do not typically account for reserves for capital
replacement. This category represents the inclusion of set-asides for major
recurring or capital type expenditures experienced periodically by any property.
This item is typically accounted for either on a dollar per space ($20.00 to
$30.00) or a percentage (0.5% to 2.0%) of effective gross income. We have used
$30.00 per space per year, believed adequate to cover future capital costs.
This equates to $4,650 annually, equal to approximately 2.20% of the effective
gross income estimate.
61
Income Capitalization Approach
Expense Summary
---------------
To summarize, we have estimated the stabilized total operating expenses for
the subject to be $127,655. This estimate is equal to 60.51% of the effective
gross income estimate or $823.58 per space annually.
Expense Summary
ˇ Enlarge/Download Table
=============================================================================================
1997 1998 Comp Comp Comp Stabilized
1 2 3 Estimate
---------------------------------------------------------------------------------------------
Total $ 271,747 $ 246,655 $151,215 $ 154,515 $182,581 $127,655
---------------------------------------------------------------------------------------------
% EGI 105.96% 87.80% 48.29% 44.96% 48.39% 60.51%
---------------------------------------------------------------------------------------------
$/Space $1,753.21 $1,591.32 $ 775.46 $1,188.58 $ 727.42 $823.58
=============================================================================================
As shown on the preceding table, expenses have historically represented
between 87.80% (1998) and 105.96% (1997) of the Effective Gross Income,
reflective of the community filling. The expense comparables, as summarized
above, indicated a range from 44.96% (Comparable Number 2) and 48.39%
(Comparable Number 3).
Our estimate of total expenses is equal to 60.51% of the effective gross
income estimate. It should be noted that total expenses have been reduced due to
the resident picking ups all of the utilities, which was previously absorbed by
the community. Historical expenses did not include a reserve for capital
expenditures. Additionally, none of the expense comparables reflect a reserve
for capital expenditures, which has been included in our estimate. The
subject's historical expenses include concessions given to fill the community,
which are no longer applicable.
Our estimate of net operating income is $83,311. Our stabilized estimate
of income and expenses for the subject is presented on the following page.
================================================================================
The Pines Manufactured Housing Community
Stabilized Operating Statement
ˇ Download Table
% of $ per
Amount EGI Space
================================================================================
Total Effective Gross Income $ 210,966 100.00% $ 1,361.07
Expenses
Insurance $ 3,875 1.84% $ 25.00
Office 21,700 10.29% 140.00
Maintenance & Repairs 18,600 8.82% 120.00
Management Expense 10,548 5.00% 68.05
Wages & Benefits 44,950 21.31% 290.00
Property Taxes 7,832 3.71% 50.53
Utilities 15,500 7.35% 100.00
Reserves 4,650 2.20% 30.00
-----------------------------------
Total Expenses $ 127,655 60.51% $ 823.58
Net Operating Income $ 83,311 39.49% $ 537.49
================================================================================
63
Income Capitalization Approach
Capitalization Discussion
-------------------------
Two alternative methods of valuation are employed in the Income Approach.
Direct capitalization is a method of converting net operating income into market
value, employing a "capitalization" rate based upon market perimeters. This
approach is particularly applicable to properties with a stable income stream,
or in cases where income, and consequently value, can be projected to increase
at a constant or stable rate.
An alternative valuation method is yield capitalization, which employs a
year-by-year projection of income and expenses, recognizing rent changes and the
cost of improvements as they occur. Yield capitalization, also known as
Discounted Cash Flow Analysis, is considered most appropriate in the valuation
of properties with uneven income streams. Since investors are unwilling to pay
for any upside from vacant units, fully developed manufactured housing
communities are typically valued by direct capitalization.
Direct Capitalization
---------------------
Direct capitalization of net operating income by an overall capitalization
rate extracted from the market provides an excellent indication of market value.
Purchasers of manufactured housing communities most often utilize this method.
This method is the most easily understood, closely related to the market, and
convincing if the overall rates abstracted from recent sales are from comparable
sale properties and accurate income data are available. Income data was
available from all of the comparable sale properties included in this report.
Market Data
-----------
The comparable sale data shown in the Sales Comparison section of this
report indicated an overall capitalization rate from 9.15% to 12.9%. Our
analysis of this data indicated a narrow range in overall capitalization rates,
which tend to be influenced by the size of the community and its age and
condition.
Comparable Sales
ˇ Download Table
============================================================
Sale Sale Date Overall
Number Capitalization Rate
------------------------------------------------------------
1 07/97 9.50%
------------------------------------------------------------
2 09/97 12.15%
------------------------------------------------------------
3 01/97 10.00%
------------------------------------------------------------
4 12/97 12.90%
============================================================
Sale comparable one is a similar community compared to the subject in terms
of size and condition. The property is older, but has superior amenities. Sale
comparable two is slightly smaller and older, but in good condition. The
property is located just northwest of
64
Income Capitalization Approach
Atlanta, but the average lot rent is higher. Sale comparable three is a larger
property and has a convenience store, but is in similar condition. The property
is located only a few miles south of the subject in North Charleston. Sale
comparable four is similar in age, but smaller in size. The property is in fair
condition and located in Moncks Corner in Berkeley County.
As discussed in the Marketability and Exposure Period section of this
report, our sources indicated that institutional investors required 8.5% to 9.5%
overall capitalization rates for projects in the 200 space range and were the
most restrictive in pricing due to stringent criteria. We also found that REIT
investors were bidding rates down even further. Our information revealed that
manufactured housing community cooperatives and associations would more likely
accept slightly lower overall rates, while the small investor would require a
slightly higher rate.
Based on the comparison of the sale data to the subject and considering the
current investor and interest rate environment, the overall rate for the subject
would likely be in the 10.0% range. We have concluded a rate of 10.0%,
reflective of the subject's location and physical characteristics and the
current interest rate environment.
Debt Coverage Ratio Method
--------------------------
As an alternative to market-derived overall capitalization rates, we have
developed an overall rate through the Debt Coverage Ratio analysis. The
parameters for this calculation are summarized below.
The Debt Coverage Ratio Method of income capitalization essentially
measures the risk involved in mortgage lending. Its usefulness to mortgage
underwriting takes the form of establishing a degree of safety with a given set
of loan terms.
Mortgage underwriting typically focuses on positive debt coverage, (net
operating income/annual mortgage debt service or NOI/ADS), rather than market
value, as a negative cash flow after debt service may indicate a probability
that a mortgage loan could be in jeopardy. Accordingly, if the greatest portion
of the property's value is debt capital, as established by the loan-to-value
ratio, annual debt coverage in underwriting is a major consideration. The debt
coverage ratio method is therefore market based and direct.
By multiplying this risk factor by the projected mortgage payment
requirement an estimate of the required overall rate to satisfy the lender's
minimum risk requirements can be derived.
65
Income Capitalization Approach
The formula for this procedure is: M x f x DCR = R, where;
M = Loan to Value Ratio
f = Mortgage Constant
DCR = Debt Coverage Ratio
R = Overall Rate
To establish the criteria for the development of the Debt Coverage Ratio
Method, we have conducted a recent survey of lenders; the results are summarized
below:
ˇ Download Table
================================================================================
Contact Gene Fogarty Mike McCoy
--------------------------------------------------------------------------------
Bank NationsBank Community Bank
--------------------------------------------------------------------------------
Type Of Lender Conventional Conventional
--------------------------------------------------------------------------------
Nominal Mortgage Interest Rate 250 Basis Points 250 Basis Points
over 3 to 7 year over 5 to 10 year
Treasuries with Treasuries with
Floor of 7.25% to Floor of 7.25% to
8.0% 8.0%
--------------------------------------------------------------------------------
Amortization Period 15 - 20 Years 15 - 25 Years
--------------------------------------------------------------------------------
Loan Term 3 - 7 Years 5 - 10 Years
--------------------------------------------------------------------------------
Debt Coverage Ratio 1.20 - 1.25 1.20 - 1.25
--------------------------------------------------------------------------------
Loan To Value Ratio 75% 75%
================================================================================
Our survey of local lenders indicated an annual interest rate of 7.50%.
A mortgage loan would be available at 75% of the market value, based on a
20-year amortization schedule. Based on these criteria the indicated annual
interest rate constant is 9.6671%. Additionally, our survey indicated that a
minimum debt coverage ratio (DCR) of 1.25 to 1.00 would likely be required for a
property similar to the subject. An overall capitalization rate, based on these
assumptions, has been developed as shown below
ˇ Enlarge/Download Table
=======================================================================================================
M F DCR OAR
X X
Loan to Value Ratio Mortgage Constant Debt Coverage Ratio Overall Rate
--------------------------------------------------------------------------------------------------------
0.75 0.096671 1.25 0.09063
--------------------------------------------------------------------------------------------------------
Rounded 9.1%
========================================================================================================
The debt coverage ratio method indicated a capitalization rate based upon
financing by local banks. However, as the popularity of manufacturing housing
community investments has
66
Income Capitalization Approach
increased, alternate sources of financing have become available through
insurance companies and conduit programs.
The presence of institutional investors in the market and the dearth of
quality real estate investments have bid down rates on manufactured housing
communities. Investors have become more creative in their acquisition
strategies in order to compete. Therefore, actual transactions in the
marketplace better demonstrate investor perceptions of yields on manufactured
housing community investments.
The rates typically reflect a narrow range and are considered mutually
supportive. Therefore, we have estimated an overall capitalization rate of
10.0%. We have used this rate in the direct capitalization method to capitalize
the net income of $83,311. The value conclusion via the direct capitalization
method is summarized as follows:
$83,311 divided by .10 $833,110
In order to estimate the value of the subject on an "as is" basis, the
estimated cost of $100,000 was deducted from the above value for installing the
water meters. We estimated the "as is" market value of the subject property at
$733,110, rounded to $730,000.
67
SALES COMPARISON APPROACH
-------------------------
The fundamental premise of the Sales Comparison Approach is the concept
that the analysis of sales of reasonably similar properties provides an
appraiser with empirical data from which observations and conclusions about the
property being appraised can be made. Proper application of the approach
requires that:
1. Only market transactions must be weighed, and the data of each
transaction must be confirmed to the greatest extent possible.
2. The degree of comparability of each sale to the subject must be
considered; differences in physical, functional and economic
characteristics be noted; and adjustments for the differences be made.
3. The value conclusion must be consistent with the analysis of the sales
data.
For a conveyance to qualify as a "market transaction", four factors must be
present:
1. The conveyance must be "arm's length"; that is, it must be between two
non-related parties.
2. Neither the buyer nor the seller should have been under compulsion to
act.
3. The property should be available to the class of purchasers best able
to utilize the facility.
4. The price must be expressed in the equivalent of cash, adjusted for any
special financing, concessions, or terms.
For any class of real estate, the market area for comparative data must
reflect the area prospective purchasers would consider. Comparability is also a
function of the physical character of the asset to be appraised. Classes of
real estate in which physical specifications are standardized, or in which scale
is small, and/or in which the commodity has achieved uniform market recognition
require that the sales data considered closely resemble the subject. As
specifications become more complex, as scale increases, and as market
recognition declines, the physical similarity of the sales data and the subject
tends to decline.
68
Sales Comparison Approach
To judge the degree of comparability that exists between the sales selected
for analysis and the subject, several guidelines were applied.
1. Each sale is in the same market as the subject. To the extent that a
market is a meeting place for buyers and sellers of real estate of a
given type, the boundaries of the market are set by the participants in
merchandising and absorbing competitive properties and are economic not
purely physical or geographic.
2. Physical characteristics of the subject and comparables are similar.
3. The functional adequacy of each sale property and the subject are
competitive in terms of the ability of each to support similar
functions.
To draw a conclusion from the analysis of the sales data, a unit of
comparison has been selected. The calculation of a unit of comparison provides
a common denominator by which the market sales can be related to each other and
to the subject property. The commonly accepted unit of comparison in the
valuation of a manufactured housing community is the sale price per space. This
unit of comparison emphasizes the contribution of the improvements, and the
contribution of the land is merged into the unit-selling price.
While a diverse array of transactions was initially considered, the sales
selected for direct comparison to the subject are those transactions that are
most similar to the subject. For features that are dissimilar, adjustments have
been made leading to an indication of the price at which the subject could be
expected to sell. In considering adjustments, relevant factors were considered
including:
1. Nature of surrounding development.
2. Relative size.
3. Availability of competing properties.
4. Effect of time on selling prices.
5. Age and condition of the improvements.
6. Amenities and occupancy.
In our search for comparable sales, we excluded senior communities since
they tend to have a less transient occupancy base and typically trade at lower
capitalization rates than all age communities.
Based on our investigation, the following four sales are the most
significant transactions for direct comparison with the subject.
69
Sales Comparison Approach
Due to a lack of large sales in the Charleston area, we expanded our search
to elsewhere in South Carolina and neighboring Georgia. These sales occurred
between August 1997 and December 1997. The properties ranged in size from 115
to 311 spaces. The sale prices, on a per space basis, ranged from $4,838 to
$11,739. The Effective Gross Income Multipliers (EGIM) ranged from 3.1 to 7.5.
The indicated overall capitalization rates range from 9.5% to 12.9%.
The following pages detail each of the four sales, following which we have
presented a summary of the pertinent data.
70
Sale Comparable Number One
Augusta Estates
2526 Milledgeville Road
Augusta, Richmond County, Georgia
[PHOTOGRAPH APPEARS HERE]
Sale Date: July 1997
PROPERTY DESCRIPTION
--------------------
Size/Type: 148 space all age manufactured housing community
Utilities: All available
Land Description: Generally level, irregularly shaped 13.4-acre parcel of
land with adequate access. Improved with asphalt-paved
streets and streetlights.
Improvements/Amenities: Office, pool and laundry.
Year Built/Condition: 1960's/Fair
71
Sale Comparable Number One
INCOME DATA
-----------
Annual Occupancy: 70.9%
Average Lot Rent: $155.00
Effective Gross Income: $195,449
Expenses: $90,949
Net Income: $104,500
SALE DATA
---------
Sale Price: $1,100,000
Cash Equivalent Price: $1,100,000
Grantor: Palmetto Associates
Grantee: Palmetto Estates LLC
Financing Terms: Seller financing at market rates.
Sales History
(Past 3 Years): None noted
Market Exposure: Unknown
COMPARISON DATA
---------------
Sale Price/Space: $7,432
Effective Gross Income
Multiplier (EGIM): 5.63
Overall Capitalization
Rate (OAR): 9.5%
Comments: This is an older community south of Palmetto. The
lot sizes are small and many will not accommodate a
modern home.
ˇ Enlarge/Download Table
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Similar Similar Similar Similar Superior Similar Superior
====================================================================================================================
72
Sale Comparable Number Two
Ralph's Mobile Home Park
2300 Bankhead Highway
Austell, Cobb County, Georgia
[PHOTOGRAPH APPEARS HERE]
Sale Date: September 1997
PROPERTY DESCRIPTION
--------------------
Size/Type: 115 space all age manufactured housing community
Utilities: All available
Land Description: Generally level, irregularly shaped 15.3-acre parcel of land
with adequate access. Improved with asphalt-paved streets
and streetlights.
Improvements/Amenities: None.
Year Built/Condition: 1963/Good
73
Sale Comparable Number Two
INCOME DATA
-----------
Annual Occupancy: 95%
Average Lot Rent: $225.00
Effective Gross Income: $294,975
Expenses: $130,890 (44.3% of the effective gross income)
Net Income: $ 164,085
SALE DATA
---------
Sale Price: $1,350,000
Cash Equivalent Price: $1,350,000
Grantor: Margaret M. O'Hara
Grantee: Carol and Larry Lawrence
Financing Terms: Cash to Seller
Sales History
(Past 3 Years): None noted.
Market Exposure: Unknown
COMPARISON DATA
---------------
Sale Price/Space: $11,739
Effective Gross Income
Multiplier (EGIM): 4.58
Overall Capitalization
Rate (OAR): 12.15%
Comments: This community is located in suburban northwest
Atlanta.
ˇ Enlarge/Download Table
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Superior Similar Similar Similar Similar Similar Superior
====================================================================================================================
74
Sale Comparable Number Three
Dorchester Village
5701 Dundrum Street
North Charleston, Charleston County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Sale Date: January 1997
PROPERTY DESCRIPTION
--------------------
Size/Type: 311 space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, irregularly shaped 38.7-acre parcel of land
with adequate access. Density is 8.04 pads per acre.
Improved with asphalt-paved streets, on street parking,
fenced lots and streetlights.
Improvements/Amenities: Convenience store and playground.
Year Built/Condition: 1973/Average
75
Sale Comparable Number Three
INCOME DATA
-----------
Annual Occupancy: 86.5% (269 of 311 spaces)
Average Lot Rent: $123.28
Effective Gross Income: $400,080
Expenses: 100,000 (25.0% of the effective gross income)
Net Income: $ 300,080
SALE DATA
---------
Sale Price: $3,000,000
Cash Equivalent Price: $3,000,000
Grantor: Dorchester Village Partnership
Grantee: Chatham Group Partnership
Financing Terms: Cash to seller.
Sales History
(Past 3 Years): None noted
Market Exposure: Unknown
COMPARISON DATA
---------------
Sale Price/Space: $9,646
Effective Gross Income
Multiplier (EGIM): 7.5
Overall Capitalization
Rate (OAR): 10.0%
Comments: Rental income includes $6,000 from an on-site
convenience store. Rents were $140 per month for
51 pads overlooking the marsh and $120 per month
for the remaining 261 pads. Water and sewer are
separately metered and paid directly by the
tenant. Each pad is fenced.
ˇ Enlarge/Download Table
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Similar Similar Similar Similar Similar Similar Similar
====================================================================================================================
76
Sale Comparable Number Four
Park City Trailer Park
112 N. Highway 52
Moncks Corner, Berkeley County, South Carolina
[PHOTOGRAPH APPEARS HERE]
Sale Date: August 1997
PROPERTY DESCRIPTION
--------------------
Size/Type: 37 space all age manufactured housing community
Utilities: All Public
Land Description: Generally level, irregularly shaped, 3.584 acres of
land with adequate access. Density is 10.32 spaces per
acre. Improved with asphalt paved streets.
Improvements/Amenities: None
Year Built/Condition: 1975/Fair
77
Sale Comparable Number Four
INCOME DATA
-----------
Annual Occupancy: 91.9% (34 of 37 spaces)
Average Lot Rent: $300.00 (includes pad and mobile home); $140 (lot
alone)
Effective Gross Income: $ 57,187
Expenses: $34,312 (60% of the effective gross income)
Net Income: $ 22,875
SALE DATA
---------
Sale Price: $179,000 (see Comments below)
Cash Equivalent Price: $179,000
Grantor: Marvin Wiggins
Grantee: Park City Trailer Park, Inc.
Financing Terms: Cash to Seller.
Sales History
(Past 3 Years): None noted
Verification Source: Beth Cumbie, Grantee Representative
Date: April 15, 1998
COMPARISON DATA
---------------
Sale Price/Space: $ 4,838
Effective Gross Income
Multiplier (EGIM): 3.1
Overall Capitalization
Rate (OAR): 12.9%
Comments Total consideration was $375,000 for 37 spaces and
36 mobile homes. Average rent was $300 per month
including mobile home. Lot rent alone was $140 per
month. Property is located in the center of the
city and is in fair condition with no amenities.
ˇ Enlarge/Download Table
Location Access Visibility Condition Amenities Home Quality Overall
====================================================================================================================
Similar Similar Similar Inferior Similar Similar Similar
====================================================================================================================
COMPARABLE SALES SUMMARY
ˇ Enlarge/Download Table
====================================================================================================================================
No. Name/Location Sale Price/ Number Of Price/ Average E.G.I.M./ O.A.R.
Sale Date Spaces Space Lot Rent Expense
Ratio
------------------------------------------------------------------------------------------------------------------------------------
1 Augusta Estates $1,100,000 148 $ 7,432 $155.00 5.63/ 9.5%
2526 Milledgeville Road July 1997 46.5%
Augusta, Richmond County, Georgia
------------------------------------------------------------------------------------------------------------------------------------
2 Ralph's Mobile Home Park $1,350,000 115 $11,739 $225.00 4.58/ 12.15%
2300 Bankhead Highway September 1997 44.3%
Austell, Cobb County, Georgia
------------------------------------------------------------------------------------------------------------------------------------
3 Dorchester Village $3,000,000 311 $ 9,646 $123.28 7.5/ 10.0%
5701 Dundrum Street January 1997 25.0%
North Charleston, Charleston County,
South Carolina
------------------------------------------------------------------------------------------------------------------------------------
4 Park City Trailer Park $ 179,000 37 $ 4,838 $140.00 3.1/ 12.9%
112 N. Highway 52 August 1997 60%
Moncks Corner, Berkeley County,
South Carolina
====================================================================================================================================
Improved Sales Location Map
[MAP APPEARS HERE]
80
Sales Comparison Approach
As previously stated, the Sales Comparison Approach involves investigating
recent transfers of properties similar to the subject. All of the sales were
fee simple transactions, with no abnormal financing which would effect the
price. There were no abnormal sale conditions known to have occurred, except as
noted.
Other adjustments, typically considered, are location, amenities, age and
condition, occupancy, etc., and are reflected in the average lot rent. A tenant
is typically willing, absent other factors, to pay more lot rent for a better
located, newer community. This also holds true for amenities, age and other
factors. The average lot rent reflects, in most cases, the market perception of
a property's position in the marketplace. It is also typical that lot rent
increases contribute to increases in net operating income. Alternatively, we
have employed the effective gross income multiplier (EGIM), in this analysis.
Effective Gross Income Multiplier (EGIM)
----------------------------------------
The Effective Gross Income Multiplier for the comparable sale properties
ranged between 3.1 and 7.5. As previously discussed, the EGIM is essentially a
function of the average lot rent. The average lot rent is a function of the
physical aspects of the property, such as age and condition, location and
amenities. EGIM's also reflect the market's perception of the potential for
future rent increases and a property's expense ratio. The high end of the range
represents a community with upside potential from filling lots.
The subject is an all age community, in a rural setting. The subject has a
higher expense ratio than all of the comparables except comparable number four.
Based on these considerations, we have concluded an EGIM near the low end of the
range, processing subject's Effective Gross Income of $210,966 with an EGIM of
4.5.
Thus, $210,966 x 4.0 is: $843,864
Rounded $840,000
This equates to $5,419 per space, slightly above the range of comparables.
The subject's expense ratio is below all but one of the comparables.
Price Per Space Analysis
------------------------
Adjustments, typically considered, are location, age and condition,
occupancy, etc., and are reflected in the income generating capabilities of a
community. A tenant is typically willing, absent other factors, to pay more
rent for a better located, newer community with a greater amenity package.
Rather than making a subjective percentage adjustment to the per space sales
prices, the Net Operating Income/Space (NOI/Space) reflects, in most cases, the
market perception of a property's position in the marketplace. Since investors
are mainly concerned with cash flow to service debt, the net operating income
generating capability of a particular community can be used for comparison
purposes. Typically, the higher the NOI/Space for a community, the higher the
per space sales price. The subject has a
81
Sales Comparison Approach
NOI/Space of $537.49 in our stabilized analysis. The NOI/Space and the price per
space sales prices for the comparables are shown on the following table. We then
compare the percentage difference between each comparable's NOI/Space and the
subject's NOI/Space. For comparables with a higher NOI/Space, a downward
adjustment to the per space sales price is made. An upward adjustment is made
for a comparable with a lower NOI/Space.
NOI/Space and Per Space Sales Price
ˇ Enlarge/Download Table
======================================================================================================
COMP 1 COMP 2 COMP 3 COMP 4 SUBJECT
======================================================================================================
NOI/Space $706.08 $1,426.83 $964.89 $466.90 $537.49
------------------------------------------------------------------------------------------------------
Price/Space $ 7,432 $ 11,739 $ 9,646 $ 3,654 N/A
------------------------------------------------------------------------------------------------------
Percent
Adjustment -23.88% -62.33% -44.30% +15.12% N/A
------------------------------------------------------------------------------------------------------
Adjusted
Price/Space $ 5,658 $ 4,422 $ 5,373 $ 4,206 N/A
======================================================================================================
After adjustments, the indicated range is from $4,206 to $5,658 per space.
We have placed equal emphasis on sales one and four, and concluded $5,000 per
space.
Thus, 155 Spaces x $4,900/Space is: $759,500
Rounded $760,000
This value is reflective of the indication from the EGIM method and
considered mutually supportive. We have concluded $800,000 via the Sales
Comparison Approach.
In order to estimate the value of the subject on an "as is" basis, the
estimated cost of $100,000 was deducted from the above value for installing the
water meters. We estimated the "as is" market value of the subject property via
the Sales Comparison Approach at $700,000.
82
FINAL ESTIMATE OF VALUE
-----------------------
The two approaches to value applied in the subject analysis yielded these
conclusions:
Income Capitalization Approach $730,000
Sales Comparison Approach $700,000
Depending on the circumstances of an appraisal, the two approaches to value
apply to various degrees. The income capitalization approach indicates the
amount at which a prudent investor might be interested in acquiring the
property. The sales comparison approach reflects demand and reasonable selling
price expectancy as evidenced by sales and listings of similar properties. In
the reconciliation, we reviewed each approach to value (a) to ascertain the
reliability of the data and (b) to weight the approach that best represented the
actions of typical users and investors in the marketplace.
The income capitalization approach depends on the principles of
substitution and anticipation. This approach postulates that the value of a
property derives from the net income the property will produce during its
economic life. Investors in the market predicate their decisions on economic
factors oriented to the market and concern themselves with net income and its
durability. The income capitalization approach synthesizes the capitalized
return to and of the improvements and to the land. In the current instance, the
availability of sufficient reliable and supportable historical data for the
subject, made the income capitalization approach a reliable gage of the market
value of the subject property.
The sales comparison approach uses a number of value indicators, both
physical and economic, including investors' strategies and attitudes reflected
in documented market transactions. The principle of substitution is the basis
of this approach, which states that a prudent investor will pay no more to buy a
property than the cost to buy a comparable substitute property. In the
valuation of the subject property, the sales comparison approach was considered
reliable. Given the relative homogeneity of the locations, the availability of
market data, we have emphasized this approach in the valuation.
The two approaches reflect a narrow range of values and are considered
mutually supportive. Therefore, our opinion of the market value of the subject
property, based on a reasonable exposure period of six months, as of June 1,
1999, was:
- SEVEN HUNDRED THOUSAND DOLLARS -
($700,000)
83
CERTIFICATION
-------------
I certify that, to the best of our knowledge and belief:
. The statements of fact in this report are true and correct.
. The reported analyses, opinions, and conclusions are limited only by
the reported assumptions and limiting conditions and are my personal,
unbiased professional analyses, opinions, and conclusions.
. I have no present or prospective interest in the property that is the
subject of this report, and I have no personal interest or bias with
respect to the parties involved.
. My compensation is not contingent on the reporting of a predetermined
value or direction in value that favors the cause of the client, the
amount of the value estimate, the attainment of a stipulated result,
or the occurrence of a subsequent event.
. To the best of my knowledge and belief, the reported analyses,
opinions, and conclusions were developed and this report was prepared
in conformity with the Uniform Standards of Professional Appraisal
Practice of the Appraisal Foundation, the Code of Professional Ethics,
and the Standards of Professional Practice of the Appraisal Institute.
. The use of this report is subject to the requirements of the Appraisal
Institute relating to review by its duly authorized representatives.
. As of the date of this report, L. Drake Moore, MAI have completed the
requirements under the continuing education program of the Appraisal
Institute.
. L. Drake Moore, MAI has made a personal inspection of the property
that is the subject of this report.
. No one provided significant professional assistance to the person
signing this report.
. I am in compliance with the competency provisions of the Uniform
Standards of Professional Appraisal Practice of the Appraisal
Foundation.
. This appraisal assignment was not based on a requested minimum value,
specific value, or the approval of a loan.
/s/ L. Drake Moore
--------------------------------
L. Drake Moore, MAI
84
ASSUMPTIONS AND LIMITING CONDITIONS
-----------------------------------
The primary assumptions and limiting conditions pertaining to the
conclusion in this report are summarized below.
To the best of our knowledge and belief, the statements of facts contained in
the appraisal report, upon which the analysis and conclusion expressed are
based, are true and correct. Information, estimates and opinions furnished to
us and contained in the report or utilized in the formation of the value
conclusion were obtained from sources considered reliable and believed to be
true and correct. However, no representation, liability or warranty for the
accuracy of such items is assumed by or imposed on us, and is subject to
corrections, errors, omissions and withdrawal without notice.
The legal description of the appraised property, as exhibited in the report is
assumed correct.
The valuation may not be used in conjunction with any other appraisal or study.
The value conclusion stated in this appraisal is based on the program of
utilization described in the report, and may not be separated into parts. The
appraisal was prepared solely for the purpose and party so identified in the
Purpose and Function. The appraisal report may not be reproduced, in whole or
in part, and a third party may not utilize the findings of the report for any
purpose, without the written consent of Whitcomb Real Estate.
No change of any item in any of the appraisal report shall be made by anyone
other than Whitcomb Real Estate and we shall have no responsibility for any such
unauthorized change.
The property has been appraised as though free and clear of mortgages, liens,
leases, servitudes and encumbrances, except as may be described in the
appraisal.
We are not required to give testimony or be in attendance at any court or
administrative proceeding with reference to the property appraised unless
additional compensation is agreed to and prior arrangements have been made.
Unless specifically stated, the value conclusion contained in the appraisal
applies to the real estate only, and does not include personal property,
machinery and equipment, trade fixtures, business value, goodwill or other non-
realty items. Income tax considerations have not been included or valued unless
so specified in the appraisal. We make no representations as to the value
changes that may be attributed to such considerations.
Assumptions and Limiting Conditions 85
Neither all nor any part of the contents of the report shall be disseminated or
referred to the public through advertising, public relations, news or sales
media, or any other public means of communication or referenced in any
publication, including any private or public offerings including buy not limited
to those filed with Securities and Exchange Commission or other governmental
agency, without the prior written consent and approval of and review by Whitcomb
Real Estate.
In completing the appraisal, it is understood and agreed that the report are not
now intended, and will not be used in connection with a real estate syndication.
Good and marketable title to the interest being appraised is assumed. We are
not qualified to render an "opinion of title," and no responsibility is assumed
or accepted for matters of a legal nature affecting the property being
appraised. No formal investigation of legal title was made, and we render no
opinion as to ownership of the property or condition of its title.
Unless otherwise noted in the appraisal, it is assumed that there are no
encroachments, zoning, building, fire or safety code violations, or restrictions
of any type affecting the subject property. It is assumed that the property is
in full compliance with all applicable federal, state, local and private codes,
laws, consents, licenses and regulations, and that all licenses, permits,
certificates, approvals, franchises, etc. have been secured and can be freely
renewed and/or transferred to a purchaser.
It is assumed that the utilization of the land and any improvements are within
the boundaries or property lines of the property described, and that there are
no encroachments, easements, trespass, etc., unless noted within the report. We
have not made a survey of the property, and no responsibility is assumed in
connection with any matter that may be disclosed by a proper survey. If a
subsequent survey should reflect a differing land area and/or frontages, we
reserve the right to review our final value estimate.
All maps, plats, building diagrams, site plans, floor plans, photographs, etc.
incorporated into the appraisal are for illustrative purposes only, to assist
the reader in visualizing the property, but are not guaranteed to be exact.
Dimensions and descriptions are based on public records and/or information
furnished by others and are not meant to be used as a reference in legal matters
of survey.
Management is assumed to be competent, and the ownership to be in responsible
hands. The quality of property management can have a direct effect on a
property's economic viability and value. The financial projections contained in
the appraisal assume both responsible ownership and competent management. Any
variance from this assumption could have a significant impact on the final value
estimate.
We assume that there are no hidden or unapparent conditions of the property's
soil, subsoil or structures that would render them more or less valuable. No
responsibility is assumed for such conditions, or for engineering which might be
required to discover such factors. Detailed soil studies were not made available
to us, so statements regarding soil qualities, if made in the report, are not
conclusive but have been considered consistent with information available to us
and provided by others. In addition, unless stated otherwise in the appraisal,
the land and soil of the area under appraisement appears firm and solid, but the
appraisal does not warrant this condition.
Assumption and Limiting Conditions 86
The appraisal report covering the subject property is limited to surface rights
only, and does not include any inherent subsurface or mineral rights.
The appraisal is made for valuation purposes only. It is not intended nor to be
construed to be an engineering report. We are not qualified as structural or
environmental engineers; therefore we are not qualified to judge the structural
and environmental integrity of the improvements, if any. Consequently, no
warranty, representations or liability are assumed for the structural soundness,
quality, adequacy or capacities of said improvements and utility services,
including the construction materials, particularly the roof, foundations, and
equipment, including the HVAC systems, if applicable. Should there be any
question concerning same, it is strongly recommended that an
Engineering/Construction/Environmental inspection be obtained. The value
estimate stated in this appraisal, unless noted otherwise, is predicated on the
assumption that all improvements, equipment and building services, if any, are
structurally sound and suffer no concealed or latent defects or inadequacies
other than those noted in the appraisal.
Any proposed construction or rehabilitation referred to in the appraisal report
is assumed to be completed within a reasonable time and in a workmanlike manner
according to or exceeding currently accepted standards of design and methods of
construction.
Any areas or inaccessible portions of the property or improvements not inspected
are assumed to be as reported or similar to the areas that are inspected.
Unless specifically stated in the report, we found no obvious evidence of insect
infestation or damage, dry or wet rot. Since a thorough inspection by a
competent inspector was not performed for us, the subject improvements, if any,
is assumed to be free of existing insect infestation, wet rot, dry rot, and any
structural damage which may have been caused by pre-existing infestation or rot
which was subsequently, treated.
In the appraisal assignment, the existence of potentially hazardous material
used in the construction, maintenance or servicing of the improvements, such as
the presence of urea-formaldehyde foam insulation, asbestos, lead paint, toxic
waste, underground tanks, radon and/or any other prohibited material or chemical
which may or may not be present on or in the subject property, was, unless
specifically indicated in the report, not observed by us, nor do we have any
knowledge of the existence of such materials on or in the property. We,
however, are not qualified to detect such substances. The existence of these
potentially hazardous materials may have a significant effect on the value of
the property. The client is urged to retain an expert in this field, if
desired. The value conclusion assumes the property is "clean" and free of any
of these adverse conditions unless notified to the contrary in writing.
No effort has been made to determine the possible effect, if any, on the subject
property of energy shortages or present or future federal, state or local
legislation, including any environmental or ecological matters or
interpretations thereof.
We take no responsibility for any events, conditions or circumstances affecting
the subject property or its value, that take place subsequent to either the
effective date of value cited in the appraisal or the date of our field
inspection, which ever occurs first.
Assumption and Limiting Conditions 87
The estimates of value stated in this appraisal apply only to the effective
dates of value stated in the report. Value is affected by many related and
unrelated economic conditions within a local, regional, national and/or
worldwide context, which might necessarily affect the prospective value of the
subject property. We assume no liability for an unforeseen change in the
economy, or at the subject property, if applicable.
We believe that the underlying assumptions and current conditions provide a
reasonable basis for the value estimate stated in this appraisal. However, some
assumptions or projections inevitably will not materialize and unanticipated
events and circumstances may occur during the forecast period. These could
include major changes in the economic environs; significant increases or
decreases in current mortgage interest rates and/or terms or availability of
financing altogether; property assessment; and/or major revisions in current
state and/or federal tax or regulatory laws. Therefore, the actual results
achieved during the projected holding period and investor requirements relative
to anticipated annual returns and overall yields could vary from the projection.
Thus, variations could be material and have an impact on the individual value
conclusion stated herein.
The Americans with Disabilities Act (ADA) became effective January 26, 1992.
The appraiser has not made a specific compliance survey and analysis of this
property to determine whether or not it is in conformity with the various
detailed requirements of the ADA. It is possible that a compliance survey of
the property together with a detailed analysis of the requirements of the ADA
could reveal that the property is not in compliance with one or more of the
requirements of the act. If so, this fact could have a negative effect upon the
value of the property. Since the appraiser has no direct evidence relating to
this issue, possible noncompliance with the requirements of ADA was not
considered in estimating the value of the property.
ADDENDA
LEGAL DESCRIPTION
All that certain piece, parcel or tract of land being on the South of Route 78,
in the County of Charleston, State of South Carolina, identified as Tract "B" of
the Plat of a 51.1 acre subdivision near Ladson, and which plat is recorded in
the R.N.C. office for Charleston County in Plat Book AG, at Page 21.
FINANCIALS
--------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 24
Company: 90 Windsor Partnerships Date: 03/17/99
Development ID: 964 The Pines Time: 14:29:16
This is a PRELIM report since it contains data from the current period. Entries
are not final.
ˇ Enlarge/Download Table
-----------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 2 Months 2 Months
Thru: Feb 1999 Std. Budget Variance % Feb 1999 Std. Budget Variance %
-----------------------------------------------------------------------------------------------------------------------
REVENUE
Gross Site Rent 27,500 27,210 290 1.07 54,980 54,420 560 1.03
Non Rentable Sites (2,780) (2,020) (760) -37.62 (5,290) (4,040) (1,250) -30.94
Vacancies (4,256) (4,980) 724 14.53 (9,296) (9,990) 694 6.94
Community Owned Vacancies (130) 0 (130) 0.00 (260) 0 (260) 0.00
Free Rent/Concessions 0 (420) 420 100.00 0 (840) 840 100.00
Employee Allowances (300) (270) (30) -11.11 (600) (540) (60) -11.11
Late Fees 985 775 210 27.10 1,335 1,550 (215) -13.87
------ ------ ----- ------- ------- ------ ------- -------
Net Site Rent 21,019 20,295 724 3.57 40,869 40,560 309 0.76
OTHER RENT
Home Rent 185 185 0 0.00 370 370 0 0.00
------ ------ ----- ------- ------- ------ ------- -------
Total Other Rent 185 185 0 0.00 370 370 0 0.00
UTILITY INCOME
Water Income 2,960 2,880 80 2.78 5,860 5,760 100 1.74
------ ------ ----- ------- ------- ------ ------- -------
Total Utility Income 2,960 2,880 80 2.78 5,860 5,760 100 1.74
AMENITY INCOME
Vending Income 20 10 10 100.00 20 20 0 0.00
Other Income 0 5 (5) -100.00 0 10 (10) -100.00
------ ------ ----- ------- ------- ------ ------- -------
Total Amenity Income 20 15 5 33.33 20 30 (10) -33.33
MISC. INCOME
Total Misc. Income 0 0 0 0.00 0 0 0 0.00
------ ------ ----- ------- ------- ------ ------- -------
TOTAL REVENUE 24,184 23,375 809 3.46 47,119 46,720 399 0.85
PAYROLL EXPENSE
Salaries & Wages - Mgmt. 2,100 1,950 (150) -7.69 4,200 3,900 (300) -7.69
Salaries & Wages - Maint. 1,466 1,370 (96) -6.98 3,222 2,808 (414) -14.73
Salaries & Wages - Clerical 0 189 189 100.00 0 387 387 100.00
Payroll Taxes 315 330 15 4.64 656 667 11 1.72
Health Benefits 360 360 0 0.00 720 720 0 0.00
Pension Benefits 163 158 (5) -3.44 327 319 (8) -2.47
Workers Comp Insurance 61 61 0 0.69 121 122 1 0.69
------ ------ ----- ------- ------- ------ ------- -------
Total Payroll 4,464 4,418 (46) -1.05 9,245 8,923 (322) -3.61
UTILITY EXPENSE
Water Expense 2,412 4,805 2,393 49.79 6,416 8,193 1,777 21.70
Sewer Expense 3,569 7,498 3,929 52.40 9,648 12,826 3,178 24.78
Gas Expense 0 69 69 100.00 24 116 92 79.03
Electric Expense 300 369 69 18.71 618 761 143 18.83
Cash Expense 1,834 1,516 (318) -20.97 3,531 3,521 (10) -0.30
------ ------ ----- ------- ------- ------ ------- -------
Total Utilities Expense 8,115 14,257 6,142 43.08 20,237 25,417 5,180 20.38
REPAIRS AND MAINTENANCE
Repairs & Maint - Grounds 274 1,350 1,076 79.74 1,541 2,450 909 37.09
Repairs & Maint - Buildings 232 0 (232) 0.00 624 0 (624) 0.00
Repairs & Maint - Vehicles 90 200 110 55.10 97 400 303 75.66
Vehicle Expense 31 0 (31) 0.00 114 0 (114) 0.00
Repairs & Maint - Equipment 81 200 119 59.50 272 400 128 32.05
Repairs & Maint - Homes 74 100 26 25.97 74 200 126 62.99
Equipment Rental 60 50 (10) -19.50 333 100 (233) -232.50
Supplies- Maintenance 11 100 89 89.41 64 200 136 68.16
--------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 25
Company: 90 Windsor Partnerships Date: 03/17/99
Development ID: 964 The Pines Time: 14:29:19
This is a PRELIM report since it contains data from the current period. Entries
are not final.
ˇ Enlarge/Download Table
-----------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 2 Months 2 Months
Thru: Feb 1999 Std. Budget Variance % Feb 1999 Std. Budget Variance %
-----------------------------------------------------------------------------------------------------------------------
------ ------ ----- ------- ------- ------ ------- -------
Total Repairs & Maint. 852 2,000 1,148 57.40 3,119 3,750 631 16.84
MARKETING
Advertising 370 325 (45) -13.97 721 650 (71) -10.89
Promo Incentives - Dealers (1,000) 0 1,000 0.00 0 0 0 0.00
Promo Incentives - Amort. 33 83 50 59.83 67 133 66 49.86
Business Promotions 31 75 44 58.13 31 150 119 79.07
------ ------ ----- ------- ------ ------ ------- -------
Total Marketing (565) 483 1,048 216.95 819 933 114 12.23
Collections Costs
Legal-Collection Fees 0 50 50 100.00 0 100 100 100.00
Bad Debt 985 500 (485) -97.00 985 1,000 15 1.50
------ ------ ----- ------- ------ ------ ------- -------
Total Collection Costs 985 550 (435) -79.09 985 1,100 115 10.45
GENERAL & ADMINISTRATIVE
Telephone 247 230 (17) -7.35 564 460 (104) -22.61
Supplies - Office 106 175 69 39.34 929 350 (579) -165.46
Professional Fees - MRI 269 204 (65) -31.64 477 408 (69) -16.95
License & Fees 0 750 750 100.00 741 750 9 1.21
Management Fees 1,195 1,169 (26) -2.21 2,323 2,336 13 0.58
Overhead Reimbursement 944 950 6 0.61 1,888 1,900 12 0.61
Miscellaneous Expense 0 50 50 100.00 40 100 60 60.00
------ ------ ----- ------- ------ ------ ------- -------
Total G&A 2,761 3,528 767 21.75 6,962 6,304 (658) -10.44
TAXES & INSURANCE
Real Property Taxes 636 636 (0) -0.02 1,272 1,272 (0) -0.02
Personal Property Taxes 39 39 (0) -0.44 78 78 (0) -0.44
Insurance 266 266 0 0.17 531 532 1 0.17
------ ------ ----- ------- ------ ------ ------- -------
Total Taxes & Insurance 941 941 0 0.02 1,882 1,882 0 0.02
------ ------ ----- ------- ------ ------ ------- -------
TOTAL EXPENSES 17,553 26,177 8,624 32.95 43,248 48,309 5,061 10.48
------ ------ ----- ------- ------ ------ ------- -------
NET OPERATING INCOME 6,631 (2,802) 9,433 336.64 3,871 (1,589) 5,460 343.59
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---------------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 26
Company: 90 Windsor Partnerships Date: 01/13/99
Development ID: 964 The Pines Time: 13:19:55
This is a PRELIM report since it contains data from the current period. Entries are not final.
---------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1998 Std. Budget Variance % Dec 1998 Std. Budget Variance %
---------------------------------------------------------------------------------------------------------------------------
REVENUE
Gross Site Rent 27,330 27,320 10 0.04 321,200 321,720 (520) -0.16
Additional fees 0 0 0 0.00 130 0 130 0.00
Non Rentable Sites (2,510) (2,730) 220 8.06 (28,390) (27,750) (640) -2.31
Vacancies (6,208) (3,380) (2,828) -83.67 (54,109) (50,360) (3,749) -7.44
Community Owned Vacancies (130) (140) 10 7.14 (1,590) (550) (1,040) -189.09
Free Rent/Concessions (10) (130) 120 92.31 (260) (1,670) 1,410 84.43
Employee Allowances (300) (140) (160) -114.29 (3,110) (1,650) (1,460) -88.48
State Fees 345 500 (155) -31.00 8,127 6,000 2,127 35.45
-------- -------- ------- -------- -------- ------- ------- -------
Net Site Rent 18,517 21,300 (2,783) -13.07 241,998 245,740 (3,742) -1.52
OTHER RENT
Income Rent 185 0 185 0.00 2,220 1,040 1,180 113.46
-------- -------- ------- -------- -------- ------- ------- -------
Total Other Rent 185 0 185 0.00 2,220 1,040 1,180 113.46
UTILITY INCOME
Other Income 2,980 3,080 (100) -3.25 35,560 36,140 (580) -1.60
Other Utility Income 0 0 0 0.00 20 0 20 0.00
-------- -------- ------- -------- -------- ------- ------- -------
Total Utility Income 2,980 3,080 (100) -3.25 35,580 36,140 (560) -1.55
AMENITY INCOME
Vending Income 20 15 5 33.33 100 180 (80) -44.44
Other Income 30 100 (70) -70.00 50 1,200 (1,150) -95.83
-------- -------- ------- -------- -------- ------- ------- -------
Total Amenity Income 50 115 (65) -56.52 150 1,380 (1,230) -89.13
MISC. INCOME
Other Non-operating Inc. 0 0 0 0.00 105 0 105 0.00
-------- -------- ------- -------- -------- ------- ------- -------
Total Misc. Income 0 0 0 0.00 105 0 105 0.00
-------- -------- ------- -------- -------- ------- ------- -------
TOTAL REVENUE 21,732 24,495 (2,763) -11.28 280,053 284,300 (4,247) -1.49
PAYROLL EXPENSE
Salaries & Wages-Mgmt. 2,100 1,185 (915) -77.22 16,475 14,010 (2,465) -17.59
Salaries & Wages-Maint. 2,165 977 (1,188) -121.60 9,911 10,921 1,010 9.25
Salaries & Wages-Clerical 0 798 798 100.00 8,810 8,835 25 0.29
Salaries & Wages-Bonus 0 0 0 0.00 1,879 50 (1,829) ****.**
Payroll Taxes 340 360 20 5.55 3,181 4,119 938 22.77
Health Benefits 340 340 0 0.00 4,080 4,080 0 0.00
Pension Benefits 0 0 0 0.00 176 0 (176) 0.00
Workers Comp Insurance 30 31 1 3.23 360 372 12 3.23
-------- -------- ------- -------- -------- ------- ------- -------
Total Payroll 4,975 3,691 (1,284) -34.79 44,872 42,387 (2,485) -5.86
UTILITY EXPENSE
Water Expense 2,318 3,670 1,352 36.83 42,779 48,435 5,656 11.68
Sewer Expense 2,570 7,156 4,586 64.09 67,810 84,066 16,256 19.34
Gas Expense 33 173 140 80.69 600 1,177 577 49.01
Electric Expense 203 181 (22) -11.98 4,169 4,497 328 7.29
Trash Expense 1,333 1,447 114 7.89 19,524 16,185 (3,339) -20.63
-------- -------- ------- -------- -------- ------- ------- -------
Total Utilities Expense 6,457 12,627 6,170 48.87 134,882 154,360 19,478 12.62
REPAIRS AND MAINTENANCE
Repairs & Maint-Grounds 1,124 1,100 (24) -2.17 10,043 13,200 3,157 23.91
Repairs & Maint-Buildings 821 50 (771) ****.** 1,001 600 (401) -66.81
Repairs & Maint-Vehicles 20 200 180 90.03 230 2,400 2,170 90.44
Vehicle Expense 10 0 (10) 0.00 2,114 0 (2,114) 0.00
Repairs & Maint-Equipment 3 200 197 98.55 1,190 2,400 1,210 50.40
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-----------------------------------------------------------------------------------------------------------------------
Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 27
Company: 90 Windsor Partnerships Date: 01/13/99
Development ID: 964 The Pines Time: 13:19:57
This is a PRELIM report since it contains data from the current period.
Entries are not final.
-----------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1998 Std. Budget Variance % Dec 1998 Std. Budget Variance %
-----------------------------------------------------------------------------------------------------------------------
Repairs & Maint-Homes 0 100 100 100.00 1,391 1,200 (191) -15.90
Equipment Rental 0 100 100 100.00 274 1,200 926 77.14
Repairs & Maint-Other 0 0 0 0.00 150 0 (150) 0.00
Supplies-Maintenance 14 100 86 86.19 671 1,200 529 44.07
Exterminating Expense 0 0 0 0.00 19 0 (19) 0.00
------ ------ ----- ------- ------ ------ ------- -------
Total Repairs & Maint. 1,991 1,850 (141) -7.64 17,083 22,200 5,117 23.05
MARKETING
Advertising 656 325 (331) -101.78 3,582 3,900 318 8.16
Promo Incentives-Resident 1,000 0 (1,000) 0.00 18,000 0 (18,000) 0.00
Promo Incentives-Dealers 2,000 1,000 (1,000) -100.00 4,000 12,000 8,000 66.67
Business Promotions 0 100 100 100.00 0 1,200 1,200 100.00
------ ------ ----- ------- ------ ------ ------- -------
Total Marketing 3,656 1,425 (2,231) -156.55 25,582 17,100 (8,482) -49.60
Collection Costs
Legal-Collection Fees 0 75 75 100.00 159 900 741 82.33
Bad Debt 1,200 750 (450) -60.00 4,044 3,000 (1,044) -34.79
------ ------ ----- ------- ------ ------ ------- -------
Total Collection Costs 1,200 825 (375) -45.45 4,203 3,900 (303) -7.76
GENERAL & ADMINISTRATIVE
Telephone 554 225 (329) -146.35 2,663 2,700 37 1.36
Supplies-Office 749 175 (574) -328.17 3,083 2,100 (983) -46.83
Professional Fees-MRI 168 208 40 19.04 2,229 2,496 267 10.70
License & Fees 0 0 0 0.00 1,384 766 (618) -80.72
Natl. & State Assn. Dues 0 0 0 0.00 0 204 204 100.00
Management Fees 981 1,225 244 19.89 13,612 14,216 604 4.25
Overhead Reimbursement 944 221 (723) -327.24 11,330 2,652 (8,678) -327.24
Professional Development 0 38 38 100.00 124 1,406 1,282 91.18
Dues and Subscriptions 0 0 0 0.00 354 0 (354) 0.00
Meals & Entertainment 0 25 25 100.00 57 100 43 43.00
Travel-Community 0 200 200 100.00 307 800 493 61.59
Miscellaneous Expense 500 1,450 950 65.52 1,063 17,400 16,337 93.89
------ ------ ----- ------- ------ ------ ------ -------
Total G&A 3,898 3,767 (131) -3.47 36,207 44,840 8,633 19.25
TAXES & INSURANCE
Real Property Taxes 603 603 0 0.07 7,516 7,236 (280) -3.88
Personal Property Taxes 41 41 0 0.00 492 492 0 0.00
Insurance 196 196 (0) -0.13 2,355 2,352 (3) -0.13
------ ------ ----- ------- ------ ------ ------- -------
Total Taxes & Insurance 840 840 0 0.02 10,363 10,080 (283) -2.81
------ ------ ----- ------- ------ ------ ------- -------
TOTAL EXPENSES 23,016 25,025 2,009 8.03 273,192 294,867 21,675 7.35
------ ------ ----- ------- ------- ------- ------- -------
NET OPERATING INCOME (1,284) (530) (755) -142.36 6,861 (10,567) 17,428 164.93
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Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 26
Company: 90 Windsor Partnerships Date: 01/19/99
Development ID: 964 The Pines Time: 14:55:51
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-----------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1997 Std. Budget Variance % Dec 1997 Std. Budget Variance %
-----------------------------------------------------------------------------------------------------------------------
REVENUE
Gross Site Rent 25,440 25,210 230 0.91 304,190 302,520 1,670 0.55
Non Rentable Sites (1,990) (480) (1,510) -314.58 (29,080) (5,760) (23,320) -404.86
Vacancies (4,606) 4,440 (166) -3.74 (53,127) (61,200) 8,073 13.19
Community Owned Vacancies (130) (150) 20 13.33 (1,830) (1,800) (30) -1.67
Free Rent/Concessions (20) (480) 460 95.83 (110) (5,760) 5,650 98.09
Employee Allowances (130) (250) 120 48.00 (1,580) (3,000) 1,420 47.33
Rate Fees 320 250 70 28.00 9,037 3,000 6,037 201.23
------ ------ ----- ------- ------- ------- ------- -------
Net Site Rent 18,884 19,660 (776) -3.95 227,500 228,000 (500) -0.22
OTHER RENT
Income Rent 185 130 55 42.31 1,260 1,560 (300) -19.23
------ ------ ----- ------- ------- ------- ------- -------
Total Other Rent 185 130 55 42.31 1,260 1,560 (300) -19.23
UTILITY INCOME
Water Income 2,982 3,120 (138) -4.42 29,102 30,300 (1,198) -3.95
Electric Income 0 0 0 0.00 57 0 57 0.00
------ ------ ----- ------- ------- ------- ------- -------
Total Utility Income 2,982 3,120 (138) -4.42 29,159 30,300 (1,141) -3.77
AMENITY INCOME
Pending Income 20 10 10 100.00 240 120 120 100.00
Other Income 5 25 (20) -80.00 1,786 300 1,486 495.36
------ ------ ----- ------- ------- ------- ------- -------
Total Amenity Income 25 35 (10) -28.57 2,026 420 1,606 382.40
MISC. INCOME
------ ------ ----- ------- ------- ------- ------- -------
Total Misc. Income 0 0 0 0.00 0 0 0 0.00
------ ------ ----- ------- ------- ------- ------- -------
TOTAL REVENUE 22,076 22,945 (869) -3.79 259,945 260,280 (335) -0.13
PAYROLL EXPENSE
Salaries & Wages - Mgmt. 1,150 1,185 35 2.95 13,800 13,835 35 0.25
Salaries & Wages - Maint. 1,699 1,553 (146) -9.41 14,699 19,904 5,205 26.15
Salaries & Wages - Bonus 0 0 0 0.00 1,750 0 (1,750) 0.00
Payroll Taxes 221 372 151 40.67 2,917 4,585 1,668 36.37
Health Benefits 170 0 (170) 0.00 1,743 0 (1,743) 0.00
Pension Benefits 0 82 82 100.00 488 1,012 524 51.78
------ ------ ----- ------- ------- ------ ------- -------
Total Payroll 3,240 3,192 (48) -1.50 35,398 39,336 3,938 10.01
UTILITY EXPENSE
Water Expense 4,430 3,500 (930) -26.57 48,752 42,000 (6,752) -16.08
Sewer Expense 7,259 4,800 (2,459) -51.23 79,437 68,670 (10,767) -15.68
Gas Expense 104 162 58 35.70 1,106 1,806 700 38.75
Electric Expense 293 350 57 16.22 3,527 5,400 1,873 34.68
Cash Expense 1,517 1,155 (362) -31.33 16,209 13,585 (2,624) -19.31
------ ------ ----- ------- ------- ------- ------- -------
Total Utilities Expense 13,603 9,967 (3,636) -36.48 149,032 131,461 (17,571) -13.37
REPAIRS AND MAINTENANCE
Repairs & Maint - Grounds 30 1,000 970 97.02 18,186 12,400 (5,786) -46.66
Repairs & Maint - Buildings 0 0 0 0.00 385 0 (385) 0.00
Repairs & Maint - Vehicles 66 125 59 47.55 342 1,500 1,158 77.19
Vehicle Expense 127 0 (127) 0.00 636 0 (636) 0.00
Repairs & Maint - Equipment 455 0 (455) 0.00 970 0 (970) 0.00
Repairs & Maint - Homes 0 50 50 100.00 1,200 600 (600) -100.00
Equipment Rental 0 0 0 0.00 787 0 (787) 0.00
Supplies- Maintenance 543 0 (543) 0.00 2,157 0 (2,157) 0.00
[B
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Report Date: 09/30/98 OPERATING STMT:ACTUAL-BUDGET Page: 27
Company: 90 Windsor Partnerships Date: 01/19/99
Development ID: 964 The Pines Time: 14:55:53
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Current Period Year-to-Date
1 Month 1 Month 12 Months 12 Months
Thru: Dec 1997 Std. Budget Variance % Dec 1997 Std. Budget Variance %
---------------------------------------------------------------------------------------------------------------------------
-------- -------- ------- -------- -------- ------- ------- -------
Total Repairs & Maint. 1,220 1,175 (45) -3.86 24,663 14,500 (10,163) -70.09
MARKETING
Advertising 521 310 (211) -68.06 3,911 3,720 (191) -5.13
Promo Incentives-Resident 3,000 0 (3000) 0.00 23,111 0 (23,111) 0.00
Promo Incentives-Dealers 0 2,000 2,000 100.00 6,000 24,000 18,000 75.00
-------- -------- ------- -------- -------- ------- ------- -------
Total Marketing 3,521 2,310 (1,211) -52.42 33,022 27,720 (5,302) -19.13
Collection Costs
Legal-Collection Fees (357) 50 407 814.00 (24) 600 624 104.00
Bad Debt 262 2,000 1,738 86.90 3,801 8,000 4,199 52.49
-------- -------- ------- -------- -------- ------- ------- -------
Total Collection Costs (95) 2,050 2,145 104.63 3,777 8,600 4,823 56.08
GENERAL AND ADMINISTRATIVE
Telephone 291 250 (41) -16.47 1,919 3,000 1,081 36.04
Supplies-Office 890 125 (765) -611.73 2,945 1,500 (1,445) -96.35
Professional Fees-MRI 246 250 4 1.44 2,667 3,200 533 16.65
Professional Fees-Other 0 20 20 100.00 0 240 240 100.00
License & Fees 200 0 (200) 0.00 1,216 1,661 445 26.78
Management Fees 1,083 1,147 64 5.60 12,655 13,011 356 2.73
Overhead Reimbursement (380) 198 578 291.92 2,094 2,376 282 11.87
Meals & Entertainment 0 0 0 0.00 29 0 (29) 0.00
Travel-Community 121 0 (121) 0.00 326 0 (326) 0.00
Miscellaneous Expense 6,096 1,000 (5,096) -509.61 20,608 17,400 (3,208) -18.44
-------- -------- ------- -------- -------- ------- ------- -------
Total G&A 8,547 2,990 (5,557) -185.85 44,459 42,338 (2,071) -4.89
TAXES AND INSURANCE
Real Property Taxes 585 585 0 0.00 7,020 7,020 0 0.00
Personal Property Taxes 0 0 0 0.00 363 713 350 49.02
Insurance 548 458 0 0.08 5,700 5,496 (204) -3.71
-------- -------- ------- -------- -------- ------- ------- -------
Total Taxes & Insurance 1,043 1,043 0 0.04 13,083 13,229 146 1.10
-------- -------- ------- -------- -------- ------- ------- -------
TOTAL EXPENSES 13,079 22,727 (8,352) -36.75 303,433 277,234 (26,199) -9.45
-------- -------- ------- -------- -------- ------- ------- -------
NET OPERATING INCOME (9,003) 218 (9,221) ****.** (43,489) (16,954) (26,535) -156.51
======== ======== ======= ======== ======== ======= ======= =======
PROFILES OF APPRAISERS
PROFILE OF APPRAISER
L. DRAKE MOORE, MAI
St.Cert. Gen. REA #1321098-G
REAL ESTATE EXPERIENCE
----------------------
Appraiser
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Moore has also owned and operated the
L.D. Moore Company, a commercial appraisal firm in Dallas, Texas since
1991.
Senior Appraiser/Manager
Marshall and Stevens, Inc.
Dallas, TX and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. December 1988 to September 1990.
Appraiser
Appraisal & Acquisition, Inc.
Lakeworth, Florida
Prepared appraisals on hotels and other commercial properties for purposes
of sale/purchase, property tax appeals, financing and allocation of
purchase price. September 1987 to December 1988.
Appraiser
Laventhol & Horwath
Dallas, Texas
Specialized in preparation of appraisals on hotel and commercial
properties. Performed appraisals for purposes of sale/purchase, financing
and allocation of purchase price. September 1985 to September 1987.
Profile of the Appraiser
BANKING EXPERIENCE
------------------
Vice President
BF Saul Mortgage Company
Arlington, Texas
Managed branch office and originated non-conforming single-family mortgages
in addition to investor and commercial mortgages loans for BF Saul and
Chevy Chase Savings. March 1983 to 1985.
PROFESSIONAL AFFILIATIONS
-------------------------
MAI, Member Appraisal Institute
State Certified General Real Estate Appraiser
Florida #0002401
Georgia #004008
Texas #1321098-G
Real Estate Broker License
Florida #0512812
Texas #0283892
PARTIAL LIST OF CLIENTS AND PROPERTIES
-------------------------------------
Apartments
----------
Candlelight Lenexa, KS Oaktree Square Grandview, MS
Cedars Irving, Texas Pineridge Arlington, TX
Claridge Dallas, TX Regency Cove Tampa, FL
Elmwood West Palm Beach, FL Parkwood Broken Arrow, OK
Hunters Glen Kansas City, KS Santa Fe Village Kansas City, MS
Monticeto Austin, TX Towne Oaks Austin, TX
Manufactured Home Communities and Recreational Vehicle Parks
------------------------------------------------------------
Aberdeen Ormond Beach, FL Oak Hills Kyle, TX
Aztec Kyle, Texas Ramblewood Barnwell, SC
Boulevard Estates Pasadena, TX Regency Cove Tampa, FL
Casa del Monte West Palm Beach, FL Rolling Meadows Columbia, SC
Carolina Village Concorde, NC Rose Bay Port Orange, FL
Denton West Denton, TX Tropic Isles Palmetto, FL
Dessau Austin, TX Victoria Lakes Lexington, SC
Profile of Appraiser
Hacienda Village New Port Richey, FL Villa del Sol Bradenton, FL
Hermitage Farms Camden, SC Winsdor City Sumter, SC
Self-Storage Facilities
-----------------------
American Self-Storage Charlotte, NC American Self Storage Ocala, FL
American Self-Storage Monroe, NC Extra Closet Ft. Lauderdale
American Self-Storage Newel, NC
American Self-Storage Stallings, NC
Hotels/Resorts
--------------
114-Room Ambassador Plaza, Dallas, TX
420-Room Excelsior Hotel, Little Rock, AR
121-Room Lexington Park Suites, Memphis, TN
71-Room Best Western, Guymon, OK
Office Buildings
----------------
AMI Medical Houston, TX Medical Park Hope, AR
Barnett Bank North Palm Beach, FL Okeechobee Commerce W. Palm Beach,FL
Carteret Savings Del Ray Beach, FL United Bank Roswell, NM
Enron Houston, TX Schindler Corporate Morris, NJ
Harolds Dallas, TX Texarkana Medical Arts Texarkana, TX
First South Little Rock, AR QVC Network Plymouth, MN
First Union Atlanta, GA
Industrial
----------
American Lantern McKenzie, TN Falco Lime Boca Raton, FL
American Lantern Newport, AR High Ridge Commerce Boynton Beach, FL
Campbell Soup Paris, TX John Rust Albuquerque, NM
Carrington Irving, TX Lake Pointe Centre Boca Raton, FL
Profile of Appraiser
Clients List
------------
Bank of America Heller Financial
Barnett Bank Heron Financial
Belgravia Capital Hewlett Packard
Circuit City Internal Revenue Service
Citicorp Real Estate Lexington Hotel
Collateral Mortgage Lincoln Property
CoreStates Financial Corporation NationsBank
Credit Suisse First Boston Nomura Securities
FINOVA Capital Meyers Group (The)
First Union Corporation National Realty Advisors
GE Capital PA Holdings/Whitman Corporation
Goldman Sachs QVC
Greentree Financial Sullivan Development
EDUCATIONAL BACKGROUND
----------------------
University of Texas, B.A.
American Institute of Real Estate Appraisers
The Appraisal Institute
Commercial Investment Real Estate Institute
[LOGO AND LETTERHEAD OF
South Carolina
Real Estate Appraisers Board]
Koger Office Park, Kingstree Building
110 Centerview Drive
Post Office Box 11847 (803) 896-4400
Columbia, SC 29211-1847 FAX: (803) 896-4404
TEMPORARY PRACTICE PERMIT
Pursuant to the requirements of Title XI of the Financial Institutions Reform,
Recovery and Enforcement Act and Section 40-60-110 of the South Carolina Real
Estate Appraiser Registration, License, and Certification Act, this Real Estate
Appraiser's Temporary Practice Permit is hereby issued to:
NAME: LAWRENCE D MOORE
STATE OF RESIDENCE: TX
APPRAISER CLASSIFICATION: CERTIFIED GENERAL
LICENSE/CERTIFICATE NUMBER IN RESIDENT STATE: TX-1321098-G
The above named appraiser has satisfied the qualifications of the South Carolina
Real Estate Appraisers Board and is hereby granted a TEMPORARY PRACTICE PERMIT.
This permit shall expire upon the completion date of the appraisal assignment
described below.
APPRAISAL ASSIGNMENT
THE PINES MHP, MOBILE HOME PARK; 9919 HWY 78, LADSON SC
Beginning Date: Ending Date:
04/13/1999 06/01/1999
SOUTH CAROLINA TEMPORARY PRACTICE PERMIT NUMBER: 059-99
Persons granted a TEMPORARY PRACTICE PERMIT shall not advertise or otherwise
hold themselves out as being a South Carolina State Certified or State Licensed
Real Estate Appraiser.
April 15, 1999
/s/ Robert L. Selman
--------------------
Robert L. Selman
Administrator
(Seal)
PROFILE OF APPRAISER
JOHN H. WHITCOMB, MAI, CCIM
St.Cert. Gen. REA #0001234
REAL ESTATE EXPERIENCE
----------------------
Owner
Whitcomb Real Estate
Tampa, FL
Specialize in complex real estate valuations and consulting projects.
Property types include manufactured home communities, recreational vehicle
parks, self-storage facilities, hotels, manufacturing plants, office
buildings, retail buildings and other types of commercial establishments as
well as special use facilities. Mr. Whitcomb is active in the ownership and
management of seven manufactured home communities throughout Florida.
January 1996 to present.
Partner
Chartwell Advisory Group, Ltd.
Tampa, FL
Supervised complex real estate valuations and property tax consulting
projects. Responsibilities included management of all technical staff
members throughout the country. Property types included manufactured home
communities, recreational vehicle parks, hotels, large manufacturing
plants, office buildings and retail buildings. April 1993 to January 1996.
Senior Appraiser
Marshall and Stevens, Inc.
Philadelphia, PA and Tampa, FL
Specialized in preparing appraisals for land and buildings in industrial,
commercial and residential uses. Performed appraisals for purposes of
sale/purchase, property tax appeals, syndication, financing and allocation
of purchase price. September 1985 to March 1990, and June 1992 to April
1993.
Vice President
Strategis Asset Valuation & Management, Inc.
Tampa, FL
Prepared appraisals and feasibility studies on complex commercial
properties. Performed appraisals for purposes of sale/purchase, property
tax appeals, financing and allocation of purchase price. March 1990 to May
1992.
Profile of Appraiser 2
PROFESSIONAL AFFILIATIONS
-------------------------
MAI, Member Appraisal Institute
CCIM, Certified Commercial Investment Member Commercial Investment Real Estate
Institute
State Certified General Real Estate Appraiser
Florida #0001234
PARTIAL LIST OF CLIENTS AND PROPERTIES
--------------------------------------
Manufactured Home Communities
-----------------------------
ˇ Enlarge/Download Table
Akers Away West Palm Beach, FL Lakeside Douglasville, GA
Alafia Riverfront Gibsonton, FL Lakewood Denton, TX
Alpine Village Sebring, FL Lantana Cascade Lantana, FL
Arbor Oaks Zephyrhills, FL Long Lake Village West Palm Beach, FL
Blue Heron Clearwater, FL Marlboro Court West Palm Beach, FL
Bradenton Trailer Park Bradenton, FL MH Country Club Oakland Park, FL
Carefree Village Tampa, FL Mission El Paso, TX
Carolina Village Concord, NC Moultrie Oaks St. Augustine, FL
Casa del Monte West Palm Beach, FL Oak Point Titusville, FL
Chateau Forest Seffner, FL Orange Manor East Winter Haven, FL
Chateau Village Bradenton, FL Palm Breezes Club Lantana, FL
Cloverleaf Brooksville, FL Palm Ridge Leesburg, FL
Colonial Coach Greenacres City, FL Panama City Estates Panama City, FL
Coquina Crossing St. Augustine, FL Plantation Estates Seffner, FL
Coral Lake Coconut Creek, FL Portside Jacksonville, FL
Country Club Estates Venice, FL Ridgecrest Fort Pierce, FL
Dessau Austin, TX San Souci North Fort Myers, FL
Foxcroft Village Loch Sheldrake, NY Scenic View Lakeland, FL
Foxwood Estates Lakeland, FL Seminole St. Petersburg, FL
Franklin Estates Murfreesboro, TN Shangri La Largo, FL
Gardens of Manatee Parrish, FL Southwinds Lakeland, FL
A Garden Walk West Palm Beach, FL St. Lucie Village Okeechobee, FL
The Groves Orlando, FL Sunrise Village Cocoa Beach, FL
Gwinnett Estates Snellville, GA Sunshine Lake Worth, FL
Harmony Ranch Thonotosassa, FL Tall Pines Fort Pierce, FL
Holiday Ranch West Palm Beach, FL Tara Jonesboro, GA
Holiday Plaza West Palm Beach, FL Twin Shores Longboat Key, FL
Holland Fort Lauderdale, FL Valley Pines El Paso, TX
Kings and Queens Lakeland, FL Village Glen Melbourne, FL
EXHIBIT (b)(1)(C)
LIMITED SCOPE APPRAISAL IN A
SELF-CONTAINED
REAL ESTATE APPRAISAL REPORT
225 Space - Shady Hills
Manufactured Housing Community
1508 Dickerson Pike
Nashville, Davidson County, Tennessee 37207
PREPARED FOR
Mr. Steve Waite
President
Windsor Corporation
6430 South Quebec
Englewood, CO 80111
AS OF
October 28, 1999
PREPARED BY
WHITCOMB REAL ESTATE
November 8, 1999
Mr. Steve Waite
President
Windsor Corporation
6430 South Quebec
Englewood, CO 80111
RE: 225 Space - Shady Hills
Manufactured Housing Community
1508 Dickerson Pike
Nashville, Davidson County, Tennessee 37207
Dear Mr. Waite:
At your request, we have completed a desktop update of the appraisal of the
above captioned property. The subject property was previously inspected on March
26, 1999, with the appraisal issued April 30, 1999. Our analysis commenced
October 28, 1999 and was completed November 5, 1999. The effective date of our
valuation is October 28, 1999. We estimate the "as is" market value of the
property rights outlined herein, as of October 28, 1999, based on an exposure
period of six months, to be:
- TWO MILLION FOUR HUNDRED THOUSAND DOLLARS -
($2,400,000)
The purpose of this Limited Scope Appraisal is to express our opinion of
the market value/1/ of the fee simple interest in the real estate. Our opinions
are subject to the definition of value, assumptions and limiting conditions,
certifications, and engagement instructions in this report. The reader must be
acquainted with these items prior to considering the opinions and information
described within this Limited Scope Appraisal in a Complete Appraisal Report
format.
_____________________
1 Uniform Standards of Professional Appraisal Practice (Appraisal Foundation,
1999 Edition), p. 139.
Mr. Steve Waite
November 8, 1999
Page 2
We have developed our opinions based on our understanding of the Uniform
Standards of Professional Practice (USPAP), Standards Rule 1, as promulgated by
the Appraisal Foundation.
Our appraisal was based on more current information you provided regarding
both current and forecasted operating levels for the subject property. Because a
desktop update was completed and the property was not reinspected, based upon
USPAP guidelines, the report limits its use to the client and considers anyone
else using the report an unintended user/2/. The intended user of this report is
Windsor Corporation.
It is our understanding that the intended use of this appraisal report is
for the sole purpose of assisting the client for corporate planning; its use for
any other purpose or valuation date may invalidate the appraisal.
At the client's request, we have not reinspected the subject property or
conducted an in depth analysis of the subject's market area; however, we have
considered the changes in income and expenses based on current leases and
operating levels. This appraisal assumes no substantial changes in the condition
of the property or the market affecting the subject property since our previous
inspection on April 30, 1999, unless otherwise stated. The scope of the
appraisal development gathering information on improved sales, rent, operating
expenses, capitalization and yield rates, and an analysis of regional and
neighborhood trends. Our analyses and conclusions are based upon phone surveys
with market participants, and publicly available data collected by the
appraiser. All market data were verified by the buyer, seller, broker, deed,
title company, and/or leasing agent wherever possible. The accumulated data were
analyzed in relation to the income capitalization and sales comparison
approaches.
______________________________
2 USPAP, 1999 Edition, Appraisal Foundation, Standard 2-2(c), Advisory Opinions
11 and 12 .
Mr. Steve Waite
November 8, 1999
Page 3 