Complete Appraisal - Summary Appraisal Report of the Market Value of the As Is Leased Fee Interest of the subject property Los Legate Apartments A multifamily project located at 7235 East Double Tree Road, Scottsdale, Maricopa County, Arizona 85255 Prepared For: ABC Bank 123 N. Scottsdale Road, Suite 870 Scottsdale, AZ 85253 Attention: Ms. Jim Wilson Inspection Date: March x, 2006 Valuation Date: March x, 2006 PREPARED BY: Real Estate Appraisers/Consultants P.O. Box 2829, Mesa, Arizona, 85214 Phone 480.497.1113 Fax 480.497-4774 E-mail [email protected] Job # 10680XX Copy ___ of 3 Copyright 2005 by Larry Schnepf Real Estate Appraisers/Consultants P.O. Box 2829, Mesa, Arizona, 85214 Phone 480.497.1113 Fax 480.393.0718 E-mail [email protected] March 24, 2006 File No. 10680XX Ms. Jim Wilson ABC Bank 123 N. Scottsdale Road, Suite 870 Scottsdale, AZ 85253 RE: Los Legate Apartments 7235 East Double Tree Road Scottsdale, Arizona 85255 Dear Ms. Wilson: In accordance with your request and authorization thereby for a Complete Appraisal - Summary Appraisal Report of the Market Value of the As Is Leased Fee Interest of the subject property, we hand you a narrative appraisal that describes and identifies methods of approach and valuation. The ownership, legal description, and identification of the property is set forth in the following report. The property appraised is located 7235 East Double Tree Road, in Scottsdale, Maricopa County, Arizona. It is a 135-unit multifamily property which is situated on a 5.0 acre (4.02 net acre) site. The purpose of this appraisal is to estimate the Market Value of the As Is Leased Fee Interest of the subject property site as of March x, 2006. The date of initial inspection of the property was March x, 2006. The intended user of this report is ABC Bank. The intended use (function) of this appraisal is to estimate the Market Value of the As Is Leased Fee Interest for loan underwriting purposes by ABC Bank. The value estimates are subject to the Underlying Assumptions and Contingent Conditions. Information about the region in which the property is located, the subject neighborhood, site, highest and best use, and valuation methods and techniques are discussed in detail in the report that follows. Further, the value(s) reported are intended to conform with Code of Ethics and Standards of Professional Practice of the Appraisal Institute; the Uniform Standards of Letter of Transmittal - Page i … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Professional Appraisal Practice (USPAP) as promulgated by the Appraisal Standards Board of the Appraisal Foundation and the Appraisal Institute and regulatory guidelines as published by various federal agencies. It is prepared for the above stated purpose and function and is not to be used, given, sold, transferred, or relied upon by any other person or persons than the client without the prior express written permission of the authors. The reader is also directed to the fact that the report is under copyright and any use, in whole or part, by anyone except the addressee is expressly prohibited. "Market Value", as defined by USPAP, is included in the body of the report. Within this Complete Appraisal - Summary Appraisal Report all three approaches were considered with the Income Approach given the most weight. Therefore, it is our opinion, based upon the preceding data and discussion, that the Market Value of the As Is Leased Fee Interest of the subject property, as of March x, 2006 (with an inspection date of March x, 2006), was: Market Value of the As Is Leased Fee Interest of the subject property Xxx Million Dollars $xx,xxx,xxx Respectfully submitted, SCHNEPF ELLSWORTH APPRAISAL GROUP Larry D. Schnepf, MAI, SRPA Certified Arizona General Real Estate Appraiser Certificate # 30284 Letter of Transmittal - Page ii … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Table of Contents letter of transmittal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i table of contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii executive summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv subject photographs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii forward. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 underlying assumptions\conditions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 scope of work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 premise of the appraisal and definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 type of appraisal report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 legal description. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ownership history. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 neighborhood/trade area data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 site data analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 assessed value and taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 improvement description. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 highest and best use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 valuation process. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 sales comparison approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 income approach. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 reconciliation and final value estimate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 certification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 addenda ~ Ownership/Legal Descriptions ~ Engagement Letter ~ Qualifications Table of Contents - iii … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX EXECUTIVE SUMMARY General Information: Type of Property: The subject is an existing multifamily site Type of Report: Complete Appraisal - Summary Appraisal Report Class: multifamily Job No.: 10680XX Client No.: n/a Job. Name: Los Legate Apartments Address: 7235 East Double Tree Road, Scottsdale, Maricopa County, Arizona 85255 Location: The subject property is located at the northeast corner of 72nd Street and Redfield Road, one-quarter mile north of Thomas Road and one-quarter mile east of Pima Road, in the northern part of the City of Scottsdale. Legal Description: A full legal description is included within the report. The legal description was obtained from public records. Statement of Ownership: Documents detailing the ownership are herein. Ownership is currently in the name of Los Legate LLC. Form of Ownership: Fee Simple Interest Property Rights Appraised: Market Value of the As Is Leased Fee Interest of the subject property Intended User/Intended Use (Function) of the Appraisal: The intended user of this report is ABC Bank. The intended use (function) of this appraisal is to estimate the Market Value of the As Is Leased Fee Interest for loan underwriting purposes by ABC Bank. Executive Summary - iv … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Improvements Summary: The subject is improved with 135-unit apartment project constructed in five detached two and three-story buildings. The unit mix includes 91 1BR/1BA units at 718 square feet and 44 2BR/2BA units at 889 square feet. Half of the one-bedroom units and half of the two-bedroom units have fireplaces. The net livable area 96,805 square feet with an average 763 square feet. Amenities include private balconies or patios, ceiling fans, washers/dryers, swimming pool and spa. Off-site improvements include paved street, curbs, gutters and streetlights. Improvements Size: 1BR/1BA/FP@ 718 SF x 33 units = 2BR/2BA @ 889 SF x 22 units = 2BR/2BA/FP @ 889 SF x 22 units = Total Rentable Area (SF) Office/Recreational Building (SF) Gross Building Area (SF) Age: Completed 1986 Assessors Parcel: 215-05-365 Flood Zone Designation: Zone FIRM Map #04013 1685F, Effective September 30, 2005. Real Estate Taxes: The real estate taxes for 2005 totaled $44,491.66. Site Area: 5.0 Acres (217,800 SF), 4.02 net acres (175,147 SF). Zoning: R-5, Multifamily residential, City of Scottsdale. Topography: The site is basically level. Easements: No unusual items or restrictions were noted. No title report was provided to the appraisers. Nuisance and Hazards: No environmental reports were provided to the appraisers. No obvious adverse environmental conditions were noted during the inspection. No known nuisances, hazards or environmental problems exist. Highest and Best Use: As Is - -multifamily site Executive Summary - v 22,077 19,866 19,866 96,805 1,392 99,755 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Unit Type: The most applicable site unit measurement is price per unit. Date of Inspection: March x, 2006 Date of Valuation: March x, 2006 Valuation Conclusions: Sales Comparison Approach: Per unit method:. . . . . . . . . . . . . . . . . . . . . $xx,xxx,xxx Income Approach: Gross Income Multiplier Method:. . . . . . . $xx,xxx,xxx Derivation from the Comparable Sales Method:. . . . . . $xx,xxx,xxx Market Value of the As Is Leased Fee Interest of the subject property Xxx Million Dollars $xx,xxx,xxx Prepared By: Larry D. Schnepf, MAI, SRPA Certified Arizona General Real Estate Appraiser Certificate # 30284 SCHNEPF ELLSWORTH APPRAISAL GROUP P.O. Box 2829 Mesa, Arizona 85214 (480) 497-1113 Fax (480) 497-4774 Prepared For: Ms. Jim Wilson Abc Bank 123 N. Scottsdale Road, Suite 870 Scottsdale, AZ 85253 Executive Summary - vi … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX SUBJECT PHOTOGRAPHS Subject Photographs - vii … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX FORWARD Real estate investment decision-makers are frequently confronted with problems that require the valuation of specified rights of real estate to aid in facilitating reasonable and logical solutions. Such valuations are called appraisals that, if professionally produced, are defensible in terms of a specified set of market or other value considerations or decision criteria. A professionally produced appraisal is a supportable estimate of the value of real property. It is one thing to comment or speculate upon the value of real estate. It is quite another to describe the factors and influences that affect value, to describe the environmental and locational factors which influence value, and to support the presentation and analysis of relevant data to a supportable value conclusion. The structure of real estate appraisal is predicated upon a rational decision-making approach by informed decision-makers. That is to say, once presented with the best available information about the alternatives or decision choices confronting him, the decision-makers are presumed to apply logic in selecting the alternative course of action that promises to come closest to their stated objective. These decision-makers are generally seeking to maximize or optimize their economic well-being. The "best available information" on which the decision choice is made is (or should be) provided by an appraisal, and "best available information" should be adequately analyzed to aid the decision-maker. It is the intent of the report that follows, to present analyses of relevant economic, locational and physical data to produce a professional, supported value estimate of the subject property as of the date indicated. A narrative appraisal report is a description of the factors that influence the value of the property, a word portrayal of the property, the facts concerning the property and an account of the reasoning by which the appraiser has developed his opinion of its value. Procedurally, the process approximates a funnel whereby the multitudinous data, influences and opinions are introduced, analyzed and correlated to permit the reader to follow intelligently the appraisers' reasoning. Hopefully, upon completing perusal of the report that follows, the reader will concur in the appraiser's conclusions and that he will agree professional, supportable value estimates of the subject property have been presented. The staff of SCHNEPF ELLSWORTH APPRAISAL GROUP, encourage your comments and questions on the following appraisal report. Forward - 1 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX UNDERLYING ASSUMPTIONS/CONDITIONS The following Underlying Assumptions and Limiting Conditions1 apply to the property appraised herein and the appraisal report transmitted herewith. 1. Limit of Liability: The liability of Schnepf Ellsworth Appraisal Group and employees is limited to the fee collected for preparation of the appraisal. There is no accountability for liability to any third party. No third parties may rely upon this appraisal report for any purpose whatsoever, including the provision of financing for the acquisition of improvement of the subject property. This appraisal was prepared specifically for our client. Third parties who desire us to prepare an appraisal of the subject property for their use should contact the signatory of this report. 2. Copies, Publication, Distribution, Use of the Appraisal Report: Possession of the appraisal report or a copy of it does not carry with it the right of publication through advertising media, or any other public means of communication. It is a privileged communication. The appraisal report may not be used for any purpose other than the purpose stated in the report by any person or corporation other than the client or the party to whom it is addressed or copied without the written consent from the appraiser(s), and then only in its entirety. All valuations in the report are applicable only under the stated program of Highest and Best Use, and are not necessarily applicable under other programs of use. The value of a component part of the property is applicable only as a part of the whole property. The physical report(s) remains the property of the appraiser(s) for the use of the client, the fee being for the analytical services only. Neither all, nor any part of the contents of this report, shall be conveyed to the public through advertising, public relations, news, sales, or other media, without the prior written consent and approval of the author(s), particularly as to valuation conclusions, the identity of the appraiser(s), or firm with which he is connected, or any reference to the Appraisal Institute, or the MAI designation. Disclosure of the contents of this report is governed by the By-Laws of Regulations of the Appraisal Institute and the Arizona Appraisal Board. 3. Third Parties: No third parties may rely upon this appraisal report for any purpose whatsoever, including the provision of financing for the acquisition of improvement of the subject. This appraisal was prepared specifically for our client. Third parties who 1 Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Edition, Standards Rule 2-1(c), 2-2. Underlying Assumptions/Conditions - 2 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX desire us to prepare an appraisal report on the subject property for their use should contact the signatures of this report. 4. Confidentiality: The appraiser(s) may not divulge the material (evaluation) contents of the report, analytical findings or conclusions, or give a copy of the report to anyone other than the client or his designee as specified in writing (except as may be required by the Appraisal Institute as they may request in confidence for ethics enforcement), or by a court of law or body with the power to subpoena. [USPAP, Ethics Provision.] 5. Use in Entirety This appraisal is to be used only it its entirety and no part is to be used without the whole report. All conclusions and opinions concerning the analysis that are set forth in the report were prepared by the appraiser(s) whose signature(s) appear on the appraisal report, unless indicated as "Review Appraiser." No change of any item in the report shall be made by anyone other than the appraisers, and the appraisers and associated company shall have no responsibility if any such unauthorized change is made. 6. Information and Data: No responsibility is assumed for accuracy of information furnished by or from others, the client, his designee, or public records. We are not liable for such information or the work of possible sub-contractors. The comparable data relied upon in this report has been confirmed with one or more parties familiar with the transaction or from affidavit; are considered appropriate for inclusion to the best of our factual judgment and knowledge and is accepted as satisfactory evidence upon which rests the final expression of property value. It is assumed that all information known to the client and relative to the valuation has been accurately furnished and that there are no undisclosed leases, agreements, liens, or other encumbrances affecting the use of the property. 7. Court Testimony/Consultation: The contract for appraisal, consultation or analytical service is fulfilled and the total fee payable upon completion of the report. The appraiser(s) or those assisting in preparation of the report will not be asked or required to give testimony in court or hearing because of having made the appraisal, in full or in part, nor engage in post appraisal consultation with client or third parties except under separate and special arrangement and at an additional fee. (Please refer to the Contract for Appraisal Services: "Additional" Services Rates for itemized fee schedule.) Underlying Assumptions/Conditions - 3 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX 8. Exhibits: The sketches included in the report are only to aid the reader(s) in visualizing the property and are not necessarily to scale. Sizes and dimensions should not be scaled from the sketches. Various photos, if any, are included for the same purpose and are not intended to represent the property in other than actual status, as of the date of the photo. 9. Legal, Engineering, Financial, Structural, Hidden Components: No responsibility is assumed for matters legal in character or nature, whether existing or pending, nor matters of survey, nor of any architectural, structural, mechanical or engineering nature. The property is appraised as if free and clear, unless otherwise stated in particular parts of the report. No opinion is rendered as to the title, which the appraiser(s) assumes to be good and merchantable; the property is an unencumbered fee; and the property does violate any applicable codes, ordinances, statutes, or other governmental regulations. The property is appraised as though under responsible ownership and competent management. The appraiser(s) assumes that all required licenses, certificates of occupancy, consents, or other legislative or administrative authority from any local, state, or national government or private entity or organization have been or can be obtained or renewed for any use on which the value estimate contained in this report is based. 10. Legal Description: The legal description is assumed to be correct as used in this report as furnished by the client, his designee or as derived by the appraiser. The appraiser(s) has neither made a legal survey nor has he commissioned one to be prepared; therefore, reference to a sketch, plat, diagram or previous survey appearing in the report is only for the purpose of assisting the reader to visualize the property. 11. Soil Conditions: The appraiser(s) inspected, by observation, the land and the improvements thereon; however, it was not possible to personally observe conditions beneath the soil or hidden structure, or their components, or any mechanical components within the improvements; no representations are made herein as to these matters unless specifically stated and considered in the report; the value estimate considers there being no such conditions that would cause a loss of value. The land or the soil for the area being appraised appears firm; however, subsidence in the area is unknown. The appraiser(s) do not warrant against this condition or occurrence of problems arising from soil conditions. 12. Unapparent Conditions: The appraiser(s) inspected, by observation, the land and the improvements' thereon; however, it was not possible to observe conditions beneath the soil or Underlying Assumptions/Conditions - 4 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX hidden structure, or their components, or any mechanical components within the improvements; no representations are made herein as to these matters unless specifically stated and considered in the report; the value estimate considers there being no such conditions that would cause a loss of value. The land or the soil for the area being appraised appears firm; however, subsidence in the area is unknown. The appraiser(s) do not warrant against this condition or occurrence of problems arising from soil conditions. The appraisal is based on there being no hidden unapparent or apparent conditions of the property site, subsoil or structures that would render it more or less valuable. No responsibility is assumed for any such conditions or for any expertise of engineering to discover them. All mechanical components are assumed to be in operable condition and status standard for properties of the subject type. Conditions of heating, cooling, ventilating, electrical and plumbing equipment is considered to be commensurate with the condition of the balance of the improvements unless otherwise stated. No judgment is made as to adequacy of type of insulation or energy efficiency of the improvements or equipment. 13. Copyright Work: This appraisal report is copyrighted and registered under the provisions of the United States copyright laws. It is illegal, under these laws, to reproduce any copyrighted material by any method, in whole or in part, regardless of purpose, without the permission of the copyright owner, Larry D. Schnepf and Schnepf Ellsworth Appraisal Group. Violation of these laws and infringements upon copyrighted materials may result in legal action by the copyright owner against the infringer in U.S. Federal District Court. 14. Legality of Use: The appraisal is based on the premise that there is full compliance with all applicable federal, state and local environmental regulations and laws unless otherwise stated in the report; further, that all applicable zoning, building and use regulations and restrictions of all types have been complied with unless otherwise stated in the report; further, it is assumed that all required licenses, consents, permits or other legislative or administrative authority, local, state, federal and/or private entity or organization has been or can be obtained or renewed for any use considered in the value estimate. 15. Hazardous Materials: Unless otherwise stated in this report, the existence of hazardous material, which may or may not be present on the property, was not observed by the appraisers. The appraisers have no knowledge of the existence of such materials on or in the property. The appraisers, however, are not qualified to detect such substances. The presence of substances such as asbestos, urea-formaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value estimate is predicated on the assumption that there is no such material on or Underlying Assumptions/Conditions - 5 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX in the property that would cause a loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client is urged to retain an expert in this field, is desired. 16. Component Values: The distribution of the total valuation of this report between land and improvements applies only under the existing program of utilization. The separate valuations for land and building must not be used in conjunction with any other appraisal and are invalid if so used. 17. Auxiliary and Related Studies: No environmental or impact studies, special market study or analysis, highest and best use, analysis study or feasibility study has been requested or made unless otherwise specified in an agreement for services or in the report. The appraiser(s) reserves the unlimited right to alter, amend, revise or rescind any of the statements, findings, opinions, values, estimates or conclusions upon any subsequent such study or analysis or previous study or analysis subsequently becoming known to him (them). 18. Dollar Values, Purchasing Power: The market value estimated and the costs used, are as of the date of the estimate value. All dollar amounts are based on the purchasing power and price of the U.S. dollar and financing rates prevailing at the effective date of the value estimate. 19. Inclusions: Furnishings and equipment or business operations except as specifically indicated and typically considered as a part of the real estate have been disregarded with only the real estate being considered. 20. Proposed Improvements, Conditioned Value: Improvements proposed, if any, on or off site, as well as any repairs required are considered, for purposes of this appraisal, to be completed in good and workmanlike manner according to information submitted or considered by the appraiser(s). In cases of proposed construction, the appraisal is subject to change upon inspection of property after construction is completed. 21. Value Change, Dynamic Market, Influences: The estimated market value is subject to change with market changes over time; value is highly related to exposure, time, promotional effort, terms, motivation, and conditions surrounding the offering. The value estimate considers the productivity and surrounding the offering. The value estimate considers the productivity and relative attractiveness of the property physically and Underlying Assumptions/Conditions - 6 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX economically in the relative attractiveness of the property physically and economically in the marketplace. The "Estimate of Market Value" in the appraisal report is not based in whole or in part upon race, color or national origin of the present owners or occupants of the properties in the vicinity of the property appraised. 22. Management of the Property: It is assumed that the property, which is the subject of this report, will be under prudent and competent ownership and management, neither inefficient nor super efficient. 23. Fee: The fee for this appraisal or study is for the service rendered and not for the time spent on the physical report. 24. Interest Appraised: The valuation estimate applies only to the property specifically identified and described in the ensuing report. The value reported is only applicable to the property rights appraised and the report should not be used for any other purposes. 25. Publication: Neither all, nor any part of the contents of this report, shall be conveyed to the public through advertising, public relations, news, sales, or other media, without the prior written consent and approval of the author(s), particularly as to valuation conclusions, the identity of the appraiser(s), or firm with which he is connected, or any reference to the Appraisal Institute, the MAI or SRA designations. 26. Federal/Professional Guidelines: The Report has been prepared in conformity with, and is subject to the requirements of the Uniform Standards of Professional Appraisal Practice (USPAP) as promulgated by the Appraisal Standards Board of the Appraisal Foundation and required by the Arizona Board of Appraisal licensure law for all licensed State of Arizona appraisers; the appraisal standards required by Title XI of FIRREA (Federal Financial Institutions Reform, Recovery, and Enforcement Act of 1989) and the OCC (Office of the Comptroller of the Currency); the Office of Thrift Supervision CFR insurance regulation 563.17-1a and policy statement 571.1b, effective January 7, 1988, and the Code of Professional Ethics and Standards of Professional Appraisal Practice of the Appraisal Institute. Underlying Assumptions/Conditions - 7 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX 27. Americans with Disabilities Act: The Americans with Disabilities Act ("ADA") became effective January 26, 1992. I (we) have not made a specific compliance survey and analysis of this property to determine whether or not it is in conformity with the various detailed requirements of the ADA. It is possible that a compliance survey of the property, together with a detailed analysis of the requirements of the ADA, could reveal that the property is not in compliance with one or more of the requirements of the Act. If so, this fact could have a negative effect upon the value of the property. Since I (we) have no direct evidence relating to this issue, I (we) did not consider possible noncompliance with the requirements of ADA in estimating the value of the property. 28. Complete, Self-Contained Appraisal: If applicable (also see #29 and #30). The act or process of estimating value or an estimate of value performed without invoking the Departure Provision, under Standards Rule 2-2(a) of a Complete or Limited Appraisal performed under Standard 1, if applicable. 29. Limited Appraisal: If applicable (also see #28 and #30), as agreed upon with the client prior to the preparation of this appraisal, if applicable, this is a Limited Appraisal because it invokes the Departure Provision of the Uniform Standards of Professional Appraisal Practice. As such, information pertinent to the valuation has not been considered and/or the full valuation process has not been applied. Depending on the type and degree of limitations, the reliability of the value conclusions provided herein may be reduced. 30. Summary Appraisal: If applicable (also see #28 and #29). This is a Summary Appraisal Report which is intended to comply with the reporting requirements set forth under Standard Rule 2-2(b) of the Uniform Standards of Professional Appraisal Practice for a Summary Appraisal Report, if applicable. As such, it might not include full discussions of the data, reasoning and analysis that were used in the appraisal process to develop the appraiser's opinion of value. Supporting documentation concerning the data, reasoning, and analyses is retained in the appraiser's file. The information contained in this report is specific to the needs of the client and for the intended use stated in this report. The appraiser is not responsible for unauthorized use of this report. 31. Property Encumbrances: The property is appraised free and clear of any or all liens and encumbrances unless otherwise stated in this report. Underlying Assumptions/Conditions - 8 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX 32. Zoning: It is assumed that all applicable zoning and use regulations and restrictions have been complied with unless a nonconformity has been stated, defined and considered in this appraisal report. 33. Licenses, Certifications etc. It is assumed that all required licenses, certificates of occupancy or other legislative or administrative authority from any local, state, or national governmental or private entity or organization have been or can be obtained or renewed for any use on which the value estimates contained in this report are based. 34. Intended User and Intended Use: The information contained in this report is specific to the needs of the client and for the intended use stated in this report. It is written at a level that requires the reader to have a sophisticated knowledge of complex real estate issues, complex appraisal methodology and a geographical familiarity with the subject, and is not written for, nor expected to be understood by the public at large. The client and/or intended user is expected to review this report in a timely manner and if questions or concerns about this appraisal or appraisal report arise, communicate those to the appraiser(s) in a timely manner. If, after sixty days from the date of the delivery of this report, no questions or concerns about the appraisal or appraisal report have been communicated to the appraiser(s), no questions or concerns are assumed to exist. The appraiser(s) is not responsible for unauthorized use of this report. Any action taken by any third party, including but not limited to governmental bodies such as the State Board of Appraisal, relating to the use of this report that require legal representation of the appraisers, the cost of such legal representation shall be borne by the third party. The Schnepf Ellsworth Appraisal Group or the individual analysts will expect to be held harmless from all claims that might be brought by third parties that relate in any way to claims for injury or damage suffered as the result of the implementation of any advice we may have given or service we may have rendered in this connection. 35. Extraordinary Assumptions and Hypothetical Conditions2: Extraordinary Assumptions are defined as: "an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser's opinions or conclusions. Comment: Extraordinary assumptions presume as fact otherwise uncertain information about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as 2 Uniform Standards of Professional Appraisal Practice (USPAP) 2005 Edition, Standards Rule 1-2 (c), 2-2 (viii). Underlying Assumptions/Conditions - 9 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX market conditions or trends; or about the integrity of data used in an analysis.”3 There are no extraordinary assumptions that are part of this report. Hypothetical Conditions are defined as: "that which is contrary to what exists but is supposed for the purpose of analysis. Comment: Hypothetical conditions assume conditions contrary to known facts about physical, legal, or economic characteristics of the subject property; or about conditions external to the property, such as market conditions or trends; or about the integrity of data used in an analysis."4 There are no Hypothetical Conditions that are a part of this report. The appraisers believe the any cited Special Underlying Assumptions are not so limited in scope that the resulting appraisal would tend to mislead or confuse the client, the users of the report, or the public. The client is hereby advised that the assignment is subject to these Special Underlying Assumptions (if any). 36. Jurisdictional Exception Rule5: The Jurisdictional Exception Rule states "If any part of these standards is contrary to the law or public policy of any jurisdiction, only that part shall be void and of no force or effect in that jurisdiction."6 There are no Jurisdictional Exceptions that are a part of this report. 37. Supplemental Standards Rule7: Supplemental standards are “applicable to assignments prepared for specific purposes or property types may be issued (i.e., published) by government agencies, government sponsored enterprises, or other entities that establish public policy. An analysts and client must ascertain whether any such published supplemental standards in addition to these Uniform Standards apply to the assignment being considered.”8 There are no Supplemental Standards that are a part of this report. 38. Acceptance of this report: Separation of the signature pages from the balance of our report invalidates the value conclusion. The valuation estimate applies only to the property specifically identified and described in the ensuing report. The value reported is only applicable to the property rights appraised and the report should not be used for any other purposes. Acceptance of, or the use of, this appraisal report constitutes acceptance of the above conditions. 3 4 5 6 7 8 Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Glossary Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Glossary Uniform Standards of Professional Appraisal Practice (USPAP) 2005. Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Glossary Uniform Standards of Professional Appraisal Practice (USPAP) 2005. Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Glossary Underlying Assumptions/Conditions - 10 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX The following Underlying Assumptions and Limiting Conditions9 apply to the property appraised herein and the appraisal report transmitted herewith. 9 Uniform Standards of Professional Appraisal Practice (USPAP) 2005. Underlying Assumptions/Conditions - 11 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX SCOPE OF WORK 10 The firm of Schnepf Ellsworth Appraisal Group has been retained to estimate the Market Value of the As Is Leased Fee Interest of the subject property. Definition of the Scope of Work: The Scope of Work is defined as “the amount and type of information researched and the analysis applied in an assignment. Scope of work includes, but is not limited to, the following: v (1) the degree to which the property is inspected or identified; v (2) the extent of research into physical or economic factors that could affect the property; v (3) the extent of data research; and v (4) the type and extent of analysis applied to arrive at opinions or conclusions.”11 The appraisal process is in large part an investigatory procedure. The appraiser(s) have attempted to collect all of the relevant data on the subject from reliable sources. However, due to time and location constraints he/they may have been forced to rely in part on data sources which are not primary but secondary in nature. Additionally, he/they recognize the potential for information provided to be inaccurate due to communication problems. Therefore, the appraiser(s) request the client to review the appraisal document and if any errors are found in the data to immediately contact the appraiser(s) and relay this information to them. If factual errors are discovered, the appraiser(s) reserves the right to re-address their valuation. The appraiser(s) agrees to address any error which may be material in writing in a timely manner. As a part of this appraisal assignment, the appraiser(s) made a number of independent investigations and analyses. Initially, we relied on SCHNEPF ELLSWORTH APPRAISAL GROUP data which is retained in our files and regularly updated to reflect current market phenomena and attitudes. Further investigations undertaken and major data sources follow. A search for data in the neighborhood of the subject is accomplished first. If there is inadequate data for comparison the search is then expanded into other similar markets. The preparation of this report and the value indications adopted resulted from the utilization of numerous investigations and analyses. Initially, we relied on SCHNEPF ELLSWORTH APPRAISAL GROUP data which is retained in our files and regularly updated to reflect current market phenomena and attitudes. Further investigations undertaken and major data sources follow. 10 11 Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Standards Rule 1-2 (f) Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Glossary Scope of the Appraisal - 12 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Identification of the Appraisal Problem: The subject is an improved site built-out with an existing 110 unit apartment complex. appraisal assignment calls for the appraisers to determine the As Is Market Value of the As Is Leased Fee Interest of the subject property. Scope of the Appraisal: A clear and accurate description of the scope of the appraisal is desirable to protect those persons whose reliance on the appraisal may be affected. The term scope of work refers to the amount and type of information researched and the analysis applied in the assignment. The standards clearly impose a responsibility on the appraiser to determine the appropriate scope of work to develop the value opinion and prepare the report. By describing the scope of work, the appraiser signifies acceptance of this responsibility.12 The appraisal process is in large part an investigatory procedure. The appraiser(s) has (have) attempted to collect all of the relevant data on the subject from reliable sources. However, due to time and location constraints he (they) may have been forced to rely in part on data sources which are not primary but secondary in nature. Additionally, he (they) recognize the potential for information provided to be inaccurate due to communication problems. Therefore, the appraiser(s) request the client to review the appraisal document and if any errors are found in the data to immediately contact the appraiser(s) and relay this information to him (them). If factual errors are discovered, the appraiser(s) reserves the right to re-address their valuation. The appraiser(s) agree to address any error which may be material in writing in a timely manner. As a part of this appraisal assignment, the appraiser(s) made a number of independent investigations and analyses. Initially, we relied on Schnepf Ellsworth Appraisal Group SCHNEPF ELLSWORTH APPRAISAL GROUP data which is retained in our files and regularly updated to reflect current market phenomena and attitudes. Further investigations undertaken and major data sources follow. A search for data in the neighborhood of the subject is accomplished first. If there is inadequate data for comparison the search is then expanded into other similar markets. Area and Neighborhood Analysis: Major sources utilized include the Arizona Department of Economic Security and the Arizona Real Estate Center of Arizona State University and the City of Scottsdale. Further data was abstracted from various other Arizona business publications. The this appraisal report, the client is, per prior verbal agreement, considered familiar with the neighborhood with no detailed analysis presented herein. 12 The Appraisal of Real Estate, 12th ed., op. cit., p. 621. Scope of the Appraisal - 13 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Site Description and Analysis: The site description and analysis was based on a personal inspection by the appraiser(s). The City of Scottsdale provided zoning information and information relative to the availability of utility infrastructure. Other sources of information included the Federal Emergency Management Agency, the Maricopa County Assessor's Office, and the Maricopa County Treasurer's Office. Improvement Description and Analysis: Property data was gathered from inspection of site and inspection of the plans. Market Data Program: The appraiser obtained data on unimproved and improved property transfers occurring between 2005 and the date of valuation from Co-Star-COMPS and from public records and real estate brokers and/or property owners. The appraiser located sales of similar property within the local and regional market for the Sales Comparison Approach. Further, the appraisers have made exterior inspections of all properties utilized in our analyses. Comparable sales or the lack thereof were confirmed with Co-Star-Comps database, and public records and where possible, brokers and/or participants in the transactions. Sales were confirmed at a minimum with public records. Rental Data: A rental data survey of comparable properties was conducted for this analysis. Photographs: All of the photographs utilized in the report were taken during the inspection. The on-site manager indicated the condition of the property was similar on the date of inspection to that of the date of valuation. Hazardous Wastes: The appraiser has inspected the subject property with the due diligence expected of a professional real estate appraiser. The appraiser is not qualified to detect hazardous waste and/or toxic materials. Any comment by the appraiser that might suggest the possibility of the presence of such substance should not be taken as confirmation of the presence of hazardous waste and/or toxic materials. Such determination would require investigation by a qualified expert in the field of environmental assessment. Scope of the Appraisal - 14 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX The presence of substances such as asbestos, urea-formaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The appraiser's value estimates are predicated on the assumption that there is no such material on or in the property that would cause a loss of value unless clearly stated. No responsibility is assumed for any environmental conditions, or for any expertise or engineering knowledge required to discover them. The appraiser's descriptions and resulting comments are the result of the routine observations made during the appraisal process. The subject has been improved since 1985. No environmental reports were provided to the appraiser. If a toxic waste and/or contamination is detected, the value estimate appearing in this report is considered null and void. If a reappraisal is required, it will be made at an additional charge and upon receipt of any additional information requested (i.e., what the toxic waste and/or contaminate is and the cost of removal) by the appraiser. Research Methodology: SCHNEPF ELLSWORTH APPRAISAL GROUP has been retained to conduct an appraisal of the Market Value of the As Is Leased Fee Interest of the subject property multifamily site located 7235 East Double Tree Road,, Scottsdale, Arizona. This report is the culmination of our market research analysis and assessments of this property. The objectives of the research are: 1. To define the qualifying conditions of the appraisal; 2. To define the scope, purpose and function of the appraisal; 3. To identify and describe the subject property and its ownership; 4. To describe the subject area and neighborhood in adequate detail; 5. To determine the Highest and Best Use of the subject property. 6. To process, analyze and interpret the pertinent data, using one or more of the three approaches to value. 7. To estimate the retrospective values as of the date of valuation. The value(s) reported is subject to the constraints set forth in the Certification Section at the end of this report. Summary: Our analyses encompass historic and projected demand, current supply, and planned or new construction. The value estimates and judgments contained herein are intended to reflect the appraisers' opinion as a disinterested third party. The reader is referred to the Certification section of the report wherein the conditions Scope of the Appraisal - 15 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX are stated under which the report has been prepared. The Underlying Assumptions and Contingent Conditions section of the report present pertinent caveats. The report considers the various segments of the Scottsdale real estate market and population and land use patterns in the vicinity of the subject property. Additionally, an analysis of the highest and best use of the subject property has been completed together with an investigation into the sales of vacant sites in the general area. Scope of the Appraisal - 16 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX PREMISES OF THE APPRAISAL AND DEFINITIONS Client:13 The client of this appraisal is identified as Abc bank. Intended User(s)/ Intended Use (function) of the Appraisal:14 The intended user of this report is Abc bank. The intended use (function) of this appraisal is to estimate the Market Value of the As Is Leased Fee Interest for loan underwriting purposes by Abc bank. This report is prepared for the above stated purpose and function and is not to be used, given, sold, transferred, or relied upon by any other person or persons than the client without the prior express written permission of the authors. Purpose of the Appraisal:15 The purpose of this appraisal consulting assignment is to estimate the Market Value of the As Is Leased Fee Interest of the subject property, on a cash equivalent basis, assuming a reasonable marketing period, of the asset as described. Date of the Report:16 The date of inspection is March x, 2006. The date of our initial and follow-up inspection of the subject property. In accord with the client's instructions, the effective analysis date is March x, 2006, thus references to market conditions, sale prices, rental rates, etc. pertain to this era. The effective date of the appraisal establishes the context for the value estimate, while the date of the report indicates whether the perspective of the appraiser relative to market conditions as of the effective date of the appraisal was prospective, current, or retrospective. Reiteration of the date of the report and the effective date of the appraisal at various stages of the report, in tandem, is important for the clear understanding of the reader whenever market conditions on the date of the report are different from market conditions on the effective date of the appraisal. The perspective of the appraiser(s) is an effective date of March x, 2006, where the date of the report is the last date of inspection of the subject property by the appraisers, March x, 2006. 13 14 15 16 Uniform Standards of Professional Appraisal Practice (USPAP) 2005, SR 1-2(a). Uniform Standards of Professional Appraisal Practice (USPAP) 2005. SR 1-2(b). Uniform Standards of Professional Appraisal Practice (USPAP) 2005. Uniform Standards of Professional Appraisal Practice (USPAP) 2005 SR 1-2(d). and Statement Appraisal Standards No. 3 (SMT-3) and (SMT-4). Premises of the Appraisal and Definitions - 17 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Previous Appraisals: Schnepf Ellsworth Appraisal Group has previously prepared an appraisal report on the subject property for Marshall & Ilsley Trust Company, the last being File No. 102680 dated September 16, 2002. . Property Rights Appraised: Property rights are ownership interests in real estate and have value. It is important to know what property right(s) or estate(s) are involved in the appraisal because the estate identifies the rights being valued. Estates may be classified in several ways, the most common of which are defined as follows: Fee Simple Estate: Absolute ownership unencumbered by any other interest or estate subject only to the limitations imposed by the governmental powers of taxation, eminent domain, police power, and escheat.17 Fee Simple Title: A title that signifies ownership of all the rights in a parcel of real property, subject only to the limitations of the four powers of government.18 Leased Fee Estate: Landlord's (lessor's) interest in fee estate, bound by a stated term and other conditions of a lease or leases conveying rights, usually use and occupancy, to one or more tenants (lessees).19 Leasehold Estate: Tenant's (lessee's) property rights, usually use and occupancy, conveyed by a lease establishing a stated term and other conditions.20 Leasehold Improvements: Improvements or additions to leased property that have been made by the lessee.21 Summary of the Property Rights Appraised: The property rights appraised are the “As Is” Market Value of the As Is Leased Fee Interest of the subject property with an effective date of March x, 2006. 17 18 19 20 21 Appraisal Institute, The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago; Appraisal Institute, 1993), p. 140. Ibid., p. 120. Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Glossary. Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Glossary. Appraisal Institute, The Dictionary of Real Estate Appraisal, 3rd ed. (Chicago; Appraisal Institute, 1993), p. 204. Premises of the Appraisal and Definitions - 18 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Definition of Market Value (per USPAP): A type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal. Comment: Forming an opinion of market value is the purpose of many real property appraisal assignments, particularly when the client's intended use includes more than one intended user. The conditions included in market value definitions establish market perspectives for development of the opinion. These conditions may vary from definition to definition but generally fall into three categories: 1. the relationship, knowledge, and motivation of the parties (i.e., seller and buyer); 2. the terms of sale (e.g., cash, cash equivalent, or other terms); and 3. the conditions of sale (e.g., exposure in a competitive market for a reasonable time prior to sale). Appraisers are cautioned to identify the exact definition of market value, and its authority, applicable in each appraisal completed for the purpose of market value.22 Per the Title XI of the Federal Financial Institution's Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), Market Value is defined as follows: Market value is the major focus of most real property appraisal assignments. Both economic and legal definitions of market value have been developed and refined. A current economic definition agreed upon by agencies that regulate federal financial institutions in the United States of America 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 the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and acting in what they consider their own best interests; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale." Substitution of another currency of United States dollars in the fourth condition is appropriate in other countries or in report addressed to clients from other countries.23 22 23 Uniform Standards of Professional Appraisal Practice (USPAP) 2005 Definitions Title XI of the Federal Financial Institution's Reform, Recovery and Enforcement Act of 1989 ("FIRREA"), Public Law No. 101-73, 103 Stat. 183 (1989). Department of the Treasury, Office of the Comptroller of the Currency (OCC), Treasury, Rules and Regulations 12 C.F.R., Subpart C, 34.42 Federal Register, Volume 55, No. 165, Friday, August 24, 1990, page 34696. Resolution Trust Corporation's Final Regulation on Appraisals, 12 C.F.R., Part 1608, Revised June 1991. Premises of the Appraisal and Definitions - 19 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX This definition is the defacto national definition of Market Value and is required on all appraisal assignments done in the State of Arizona under the Arizona Appraisal Board's USPAP minimum standards requirements. Exposure Time: The estimated length of time the property interest bring appraised would have been offered on the market prior to the hypothetical consummation of a sale at market value on the effective date of the appraisal; a retrospective estimate based upon an analysis of past events assuming a competitive and open market.24 Exposure time depends on several factors including market conditions and factors of supply and demand. Pricing and competent professional marketing are two very important factors. The estimate of value herein assumed that the subject property has been exposed to the market for 12 months or less at a price not more than 10% above the appraised value. Support for this estimate is included within the Sales Comparison Approach section of this report. Marketing Time: Marketing Time is an opinion of the amount of time it might take to sell a property interest in real estate at the opinion market value level during the period immediately after the effective date of an appraisal."25 Marketing Time depends on several factors including market conditions in the immediate future. Like Exposure time, factors such as supply and demand, pricing and competent professional marketing are also very important considerations. For purposes of this analysis is estimated at 9 to 18 months. Definition of "As Is Value": As is26 value is as defined as follows: the value of specific ownership rights to an identified parcel of real estate as of the effective date of the appraisal; relates to what physically exists and is legally permissible and excludes all assumptions concerning hypothetical market conditions or possible rezoning. It is also defined as follows: "Market Value as is" on appraisal date means an estimate of the market value of a property in the condition observed upon inspection and as it physically and legally exists without hypothetical conditions, assumptions, or qualifications as of the date the appraisal is prepared."27 24 25 26 27 Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Statement Appraisal Standards No. 6 (SMT-6). Emphasis added Uniform Standards of Professional Appraisal Practice (USPAP) 2000, Frequently Asked Questions, Question. #59, page 32. Emphasis added The Dictionary of Real Estate Appraisal, 3rd ed., op. cit., p. 385. Appraisal Policies and Practices of Insured Institutions and Service Corporations, Federal Home Loan Bank Board, "Final Rule", 12 CFR Parts 563 and 571, December 21, 1987. Premises of the Appraisal and Definitions - 20 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX When an AS IS valuation premise is used, the property is valued as of a specified date, assuming the property is in precisely the condition or status it actually was (is) in on the effective date of value. This condition must be accurately described in the appraisal report. One proper approach in estimating the market value of an AS IS condition is to first estimate the market value of the completed or "stabilized" condition. The AS IS condition should consider (deduct) all of the anticipated costs incurred to achieve full completion and/or stabilized occupancy of an income property. Included might be leasing commissions, rent concessions typical of the existing market, sales concessions, estimated costs to complete construction or tenant improvements, and lost opportunity, etc. along with appropriate discounts for time, etc. In summary, an appraisal of the AS IS condition will estimate the defined value of a property while precisely reflecting its actual physical, legal, economic, and political status on the effective date of valuation. This report addresses the subject property Retrospective Value, thus the As Is Value is not applicable to this report. The appraiser(s) inspected the property on March x, 2006. The effective date (valuation date) of the report is March x, 2006. Premises of the Appraisal and Definitions - 21 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX TYPE OF APPRAISAL REPORT Over the last several years the appraisal industry has undergone major changes including the standards or guidelines which practitioners must adhere to. In 1987 the Appraisal Foundation copyrighted the original Uniform Standards. Since this time these standards have had some minor modification and some significant additions. (A complete copy of the most current edition of the standards are found in the appraisers office or are available on The Appraisal Foundation web site www.appraisalfoundation.org). In 1991 the State of Arizona pursuant to federal mandate formed the State of Arizona Board of Appraisal and began a licensing program for all appraisers doing work within the state borders. At the time the State of Arizona Board of Appraisal was organized the state board by statue incorporated the 1990 Uniform Standards of Appraisal Practice (USPAP). This report is intended to be written in compliance with the most current edition of USPAP. The 2005 Edition to the Uniform Standards of Professional Appraisal Practice provides appraisal definitions that help define 1) the act of appraising and 2) the reporting of that act. The first two definitions relate to the act of appraising and the next three relate to the reporting process28. Appraisal Development (USPAP Standard #1) Complete Appraisal: The act or process of developing an opinion of value or an opinion of value developed without invoking the DEPARTURE RULE.29 Limited Appraisal: The act or process of developing an opinion of value or an opinion of value developed under and resulting from invoking the DEPARTURE RULE.30 Appraisal Reporting (USPAP Standard #2) Self-Contained Appraisal Report: A written report prepared under Standards Rule 2-2(a) or 8-2(a).31 Summary Appraisal Report: A written report prepared under standards Rule 2-2(b) or 8-2(b).32 Restricted Appraisal Report: A written report prepared under Standards Rule 2-2(c), 8-2(c).33 28 29 30 31 32 33 Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Appraisal Standards Board, A)-11. Effective January 1, 2001. Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Definitions, SMT-7 Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Definitions, SMT-7 Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Definitions. Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Definitions. Uniform Standards of Professional Appraisal Practice (USPAP) 2005, Definitions. Type of Report - 22 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX The incorporation of these new definitions allow for six different combinations of appraisal assignments. There can be either: ‚ 1) Complete Appraisals that are Self-Contained, Summary or Restricted Appraisal Reports; or ‚ 2) Limited Appraisals that are Self-Contained, Summary or Restricted Appraisal Reports. The difference between a Complete Report and a Limited Report is a Complete Report meets all of the requirements of Standard One (deals with the operational steps in the valuation process) and a Limited Report does not meet all of the these requirements. A Limited Report relies on invoking the Departure Rule which allow selected parts of Standard One not to be meet; however there are additional requirement to meet whenever the Departure Rule is utilized. Departure Rule is defined as follows: This Rule permits exceptions from sections of the Uniform Standards that are classified as specific requirements rather than binding requirements. The burden of proof is on the appraiser to decide before accepting an assignment and invoking this Rule that the scope of work applied will result in opinions or conclusions that are credible. The burden of disclosure is also on the appraiser to report any departures from specific requirements. An appraiser may enter into an agreement to perform an assignment in which the scope of work is less than, or different from, the work that would otherwise be required by the specific requirements, provided that prior to entering into such an agreement: 1. the appraiser has determined that the appraisal process to be performed is not so limited that the results of the assignment are no longer credible; 2. the appraiser has advised the client that the assignment calls for something less than, or different from, the work required by the specific requirements and that the report will clearly identify and explain the departure(s); and 3. the client has agreed that the performance of a limited appraisal service would be appropriate, given the intended use.34 Departure is akin to a waiver of a requirement of one of the Standards Rules, and it is allowed for some requirements of Standards. At one end of the spectrum is the Self-Contained Appraisal Report, which contains detailed descriptions of the data, reasoning, and analyses used to arrive at the value conclusion. At the opposite end of the spectrum is the Restricted Use Appraisal Report, which contains virtually none of that information. In the middle of the range is the Summary Appraisal Report, which contains some, but not all, of the information. In all three cases, however, the report must contain certain required elements. 34 Uniform Standards of Professional Appraisal Practice (USPAP) 2005. Departure Rule Type of Report - 23 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX The Departure Rule allow an appraiser to perform an appraisal assignment which contains less than or different from the work that would otherwise be required by the specific requirements detailed in the Uniform Standards if the assignment is not so limited as to be misleading and the client understands and has agreed to the use of the departure rule. Once an election has been made as to the use of a Complete Report or a Limited Report, there are three different manners in which the data can be organized. This is were the "Self-Contained", "Summary" or "Restricted" reports come into play. Generally speaking a "Self-Contained Report" describes in greater detail all of the various items found in an appraisal report. In a "Summary Report", this same information is provided but it is generally summarized or stated and not explained in the same detail. A "Restricted Use Report" is very similar to a "Summary Report" except that it contains a restriction that limits reliance on the report to the client and warns that the report cannot be understood properly without additional information which is contained in the work file of the appraiser. Impact on reliability: When an appraisal is limited, there is less information and/or analysis used in the development of the opinion of value, so the value conclusion is less reliable than if the appraisal were a Complete Appraisal. The Statement regarding Permitted Departure from Specific Requirements for Real Property Appraisal states, "Both appraisers and users of appraisal services must realize that, as the degree of departure increases, the corresponding level of reliability of the Limited Appraisal decreases and the user of the appraisal service accepts a higher level of risk." If the client has agreed to a Limited Appraisal, the client accepts the risk of reduced reliability as long as the appraiser has appropriately invoked the Departure Provision and properly disclosed the departures in the appraisal report. Notice the distinction between accuracy and reliability. Webster's Third New International Dictionary defines accuracy as the "degree of conformity of a measure to a standard or a true value," and reliability as the "extent to which an experiment, test, or measuring procedure yields the same results on repeated trials." A Limited Appraisal might be just as accurate as a Complete Appraisal, but it is never as reliable. Conclusion: For the purpose of this report and per the clients request this report has been prepared as a complete appraisal - summary appraisal report. This type of report does not requires the invoking of the departure provisions. Type of Report - 24 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Plat Map - APN: 215-05-365 Type of Report - 25 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX LEGAL DESCRIPTION The subject property is located at the northeast corner of 72nd Street and Redfield Road, one-quarter mile north of Thomas Road and one-quarter mile east of Pima Road, in the northern part of the City of Scottsdale.. It is commonly known as Los legata Apartments, 7235 East Double Tree Road, Scottsdale, Arizona. The subject property legally described as: Lot xx of the West Half of the Southwest Quarter of the Northwest Quarter of the Southeast quarter of Section x, Township x North, Range x East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona.35 The subject site contains 5.0 gross acres (217,800 SF), 4.02 net acres (175,147 SF). The subject is further identified as Maricopa County Assessor's Tax Parcel Number 215-05-365. The square footage indicated from plans is utilized throughout this report. The Maricopa County Assessor's Plat Map is presented on the prior page. This is the legal description which has been furnished to us. We have accepted the legal description as a correct representation of the boundaries of the property appraised. We assume no responsibility for the accuracy of the description and we recommend that the information be verified through legal counsel or through a licensed State of Arizona land surveyor. Ownership History/Prior Sale: A guideline of the Uniform Standards of Professional Appraisal Practice (USPAP) includes a provision for the reporting and analysis of any pending or prior sales of the subject property over the last three years.36 Documents detailing the ownership are herein. Ownership is currently in the name of Los Legate LLC. Title was acquired on June 1, 2004 from BB Los Legate LLC. No sales price was indicted and this was not an arms length transaction. Current Offerings: The appraisers are not aware of any listings or offers on the subject. 35 36 Per Public Records and information provided to the appraisers. Uniform Standards of Professional Appraisal Practice (USPAP) 2002, Standard Rule 1-5(b), p. 19. Legal Description - 26 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Metro Phoenix Map Regional Map Neighborhood/Trade Area Data - 27 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Aerial Map Neighborhood/Trade Area Data - 28 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 NEIGHBORHOOD/TRADE AREA DATA A property is an integral part of its neighborhood and normally cannot be treated as an entity separate and apart from its environment. The value of real property is not intrinsic but flows into the property from its environment; real property shares the future with its neighborhood. Every neighborhood, depending on the property types located within it, has an economic life. Criteria have been developed for property types within various neighborhoods. A primary consideration in deciding the criteria for achieving optimum value for improvements in a given neighborhood is the specific purpose, or market, which the improvements serve. Specifically, the improvements must be compatible with the existing or transitory nature of the environment, and they must appeal to the user for which they were or may be constructed. Boundaries of the Neighborhood/Trade Area: A neighborhood is: . . . a group of complementary land uses; a related grouping of inhabitants, buildings, or business enterprises.37 The four basic forces are identified as social ideals and standard, economic conditions, government controls and regulations, and environmental conditions. The neighborhood is defined by economic and political boundaries. The general boundaries of the neighborhood are thus considered to be: ~ ~ ~ ~ North: South: East: West: CAP Canal and Frank Lloyd Wright Boulevard, 1 mile Shea Boulevard, 2 miles CAP Canal/104th Street, 2 mile Scottsdale Road, 3 blocks The subject's trade area extends beyond the neighborhood boundaries and includes all of Metro-Phoenix. The subject property is located at the northeast corner of 72nd Street and Redfield Road, one-quarter mile north of Thomas Road and one-quarter mile east of Pima Road, in the northern part of the City of Scottsdale. The subject is located in an area that is changing from underdeveloped desert to upper quality residential and commercial uses. It is one-half mile east of the Scottsdale Industrial Airpark and two miles east of the Scottsdale Municipal Airport. This neighborhood is approximately 13 miles north and twelve miles east of downtown Phoenix. It is ten miles northeast of downtown Scottsdale. 37 The Appraisal of Real Estate, 12th Edition, op. cit., p. 164. Neighborhood/Trade Area Data - 29 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Major Arterials: The subject property is located at the northeast corner of 72nd Street and Redfield Road, one-quarter mile north of Thomas Road and one-quarter mile east of Pima Road, in the northern part of the City of Scottsdale. Primary entrance to the subject is from Redfield Road and 72nd Street. Good access is available via Frank Lloyd Wright Boulevard (one-half mile north), Thomas Road (one-half mile south) and Thompson Peak Parkway (one-quarter mile east). Both 72nd Street and Redfield Road are feeder street paved to two lanes. Both are improved with vertical curbs, gutters and streetlights. Frank Lloyd Wright Boulevard, Thompson Peak Parkway and Thomas Road are major arterial that transverses the northeastern part of Scottsdale. Both are currently among the major traffic arterials through Scottsdale. Arizona Department of Transportation recently completed the Pima Freeway (Loop 101). This freeway will loops to the west and connect with the Squaw Peak and I-17 Freeways and to the south where it connects with the Superstition Freeway. Neighborhood Composition: Conformity of Uses: Appeal: Value Trends: Development Trends: Subject Property Market Demand: Neighborhood built-up: Location: Maintenance Level: Immediate Neighborhood Trend: Change in Present Land Use: Good Good Stable Stable Excellent 85% Suburban Good Stable Vacant to office and industrial, residential and commercial. The subject is located in within the north Scottsdale area. Scottsdale has grown from a tiny farming cluster of 2,000 persons occupying one square mile in 1951, to a vibrant community of more than 200,000 persons spread over an area of 185 square miles. Founded by Army chaplain Winfield Scott in 1888, Scottsdale, has matured into a urbane, sophisticated and cultured community. Principal Economic Activities: The Subject is located in and area of quality upscale developments just west of the Scottsdale Industrial Airpark. Other major developments in the are include; The McCormick Ranch Center, a 51 acre industrial, commercial, multifamily mixed-use project; Scottsdale Ranch, a 1,100 acre master residential, commercial development; The Mayo Clinic; The Tournament Players Club at Scottsdale and Princess Hotel, two 18-hole PGA courses that are home to the Phoenix Open; Horseman's Park, a 400 acre project including two stadium arenas with seating for Neighborhood/Trade Area Data - 30 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 10,000 spectators; Ganey Ranch Golf Course and developed area; and the McCormick Ranch master-planned community. Scottsdale is characterized by a hospitality industry serving both the business and leisure visitor. The Scottsdale economy today contains, in addition to its resorts, a diverse mix of financial services from banking to insurance and investment; business services from advertising and public relation to software development; computer services to market research and consulting; professional services from major health care providers anchored by Scottsdale Memorial Health Systems and the world renowned Mayo Clinic to attorneys, accountants, architects and engineers; a network of galleries that puts Scottsdale among the top art markets in nation; administrative offices from national headquarters of moderate-sized companies and associations to regional offices and marketing offices of larger organizations; a vibrant retail sector whose market extends well beyond the borders of Scottsdale; and a manufacturing sector anchored by Motorola in the southern part of the city and by several small to medium sized companies in the Scottsdale Airpark. Population38 1990 Scottsdale 130,069 Maricopa County 2,122,101 Arizona 3,665,228 2005 Summary Total Population Total Households 2005 Population by Sex Male Female 2005 Households by Income Median Household Income HH Income Under $50K HH Income $50K-$100K HH Income Over $100K 2000 202,705 3,072,149 5,130,632 2004 226,982 3,524,175 5,833,685 ZIP 85260 41,788 17,711 National 298,727,898 112,448,901 47.8% 52.2% 49.2% 50.8% $82,536 26.1% 32.7% 41.3% $49,747 50.3% 31.2% 18.6% Labor Force Data39 Civilian Labor Force Unemployed Unemployment Rate 38 39 1990 2000 2004 73,197 2,309 3.2% 109,643 2,128 1.9% 122,749 3,534 2.9% Sources: Arizona Department of Economic Security and U.S. Census Bureau and City of Scottsdale. Source: Arizona Department of Economic Security Neighborhood/Trade Area Data - 31 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Regional Freeway Map Medical Facilities: Scottsdale Memorial Hospital North, the closest major medical facility, is located two miles to the south. The north campus together with Scottsdale Memorial Hospital main campus near downtown are the only hospitals to serve Scottsdale. They collectively provide 552 beds. In addition, Scottsdale contains a clinic, 16 nursing homes, three emergency medical centers, one neuropsychiatric hospital, and more than 500 medical professional. Metro-Phoenix contains 42 hospitals with 8,100 beds and two psychiatric hospitals with 889 beds. Scottsdale is also home to the Mayo Clinic-Scottsdale. Educational Facility: There are adequate public elementary schools and middle schools, five public high school, 19 charter and private schools, and Scottsdale Community Colleges. Arizona State University, with 40,000+ students is located in Tempe. Community Facilities: The subject's neighborhood includes several public parks a public library, and a post office. Other community facilities such as golf courses and sports courts/fields are located within a five-mile radius. Neighborhood/Trade Area Data - 32 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Government Services: Local Government: Police Department: Fire Department: Mayor, 6 Council Members, City Manager City of Scottsdale City of Scottsdale Utilities: Water and sewer service are municipally provided, natural gas service from Southwest Gas Corporation, electrical service by Arizona Public Service and Salt River Project, and telephone service via US West Communications/AT&T. Housing: The neighborhood is classified as a stable residential area. Residential areas include a mix of single-family, condominium and multifamily residences ranging from new to 30 years old. The typically price ranges is from $500,000 to $1,000,000 plus. Multi-family residences typically range from 100 to 300 units and were build in the 1970's through the 2000's. Conclusions: Neighborhood land uses include a variety of industrial, residential and commercial developments. In the aggregate, the occupancy rates of these projects suggest that demand in on the rise. New growth is occurring in the commercial and office markets. Overall, the neighborhood is considered above average in terms of affluence. The subject is located in an area of upper quality residences with good linkage to Metro-Phoenix. Neighborhood/Trade Area Data - 33 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Location Map Neighborhood Map Neighborhood/Trade Area Data - 34 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Site Map Neighborhood/Trade Area Data - 35 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 SITE DATA ANALYSIS The following site description is based upon a physical inspection of the property by Larry D. Schnepf, MAI, SRPA and of Schnepf Ellsworth Appraisal Group on March x, 2006. Location: The subject property is identified by address as 7235 East Double Tree Road. The subject property is located at the northeast corner of 72nd Street and Redfield Road, one-quarter mile north of Thomas Road and one-quarter mile east of Pima Road, in the northern part of the City of Scottsdale. Measurements/Configuration: No survey was provided to the appraisers. The appraisers review the Maricopa County Assessor's Tax Parcel Maps (APN # 215-05-365). The plat map was compared to the legal description with an indicated net area of 5.0 Acres (217,800 SF), 4.02 net acres (175,147 SF). The site is rectangular in shape. Utilities/Services: Utilities appear available in adequate quantities to service the subject's improvements. Services are currently provided as follows: Electricity: Water: Telephone: Sanitary Sewer: Natural Gas: Fire: Police Solid Waste Arizona Public Service. City of Scottsdale. AT&T, U.S. West. Underground service provided. City of Scottsdale. n/a. City of Scottsdale. City of Scottsdale. Contracted to a private company who owns containers and provides collection. Utility rates are comparable to other locations in Scottsdale. Access: Physical access to the subject is good via a curb cuts on both 72nd Street and Redfield Road. The property has visibility to both street. The subject is located one half mile east of Pima Road and one quarter mile north of Thomas Road. Site Data - 36 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Street Improvements: Redfield Road and 72nd Street are minor feeder streets asphalt paved to five lanes (two in each direction plus a center turn lane). Roadside improvements include concrete curbs, gutters, sidewalks and streetlights. Pima Road and Thomas Road are closest major arterials. Both are asphalt paved and improved with concrete curbs, gutters, sidewalks and streetlights. Topography: The site is basically level. The drainage is assumed to be typical of the area. Upon our inspection of the subject, the drainage appeared to be adequate. Flood Zone: According to flood control maps, the subject is located in a Zone FIRM Map #04013 1685F, Effective September 30, 2005. The definition of Zone "X" is: Areas of minimal flooding with average depths less than one (1) foot or where the contributing drainage areas are less than one square mile; and areas protected by levees from 100-year base flood. A copy of the Flood Map follows this section. Soil Report: No soil report was provided to the appraisers. It is assumed that the soils are of sufficient load bearing capacity to support the existing improvements. Upon our inspection of the site, we noted no apparent adverse soil or subsoil conditions. No soil tests have been conducted by the appraisers. Adjoining Property: The following properties adjoin the subject: ~ ~ ~ ~ North -South -East-West-- Apartments Apartments Apartments Single-family Residential Zoning: The subject is zoned R-5, Multifamily residential, City of Scottsdale. According to the City of Scottsdale Planning Department this zoning classification permits up to 22.0 units per gross acre. The subject's density equals 22.0 units per gross acre. Site Data - 37 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Cultural: There are no cultural, historical, or archaeological factors that would impact upon development of the subject parcel. Nuisances/Restrictions: We are not qualified to determine the presence of hazardous conditions within the structure(s) described. This would include, but not be limited to, urea formaldehyde, asbestos, toxic chemicals of all kinds, dangerous electromagnetic fields, etc. Unless otherwise stated, the structure(s) is assumed to be unaffected. Easements and encroachments are only those created by municipalities and utility companies for public benefit. These types of easements are not considered to negatively impact the subject property or adversely affect the marketability of the site. No title policy was provided to the appraisers and the appraisers assume no responsibility for items that might be included therein that may affect the marketability of the title. No unusual items were noted. No unusual items or restrictions were noted. No title report was provided to the appraisers. Hazardous Waste and Materials: No environmental studies have been provided to the appraisers. No known nuisances, hazards or environmental problems are known to exist. Unless otherwise stated in this report, the existence of hazardous materials, which may or may not be present on the property, was not observed by the appraisers. The appraisers, however, are not qualified to detect such substances. The presence of substances such as asbestos, ureaformaldehyde foam insulation, or other potentially hazardous materials may affect the value of the property. The value estimate is, therefore, predicated on the assumption that there are no such materials on or in the property that would cause loss in value. No responsibility is assumed for any such conditions, or for any expertise or engineering knowledge required to discover them. The client may wish to retain an expert in this field, if desired. If the client needs certification that the property is free from environmental contamination, we suggest engagement of an expert qualified in this area. The appraiser does not claim to be an expert, and while we have not observed any problems, we are not qualified to test for contamination. The value herein is based on the assumption that the property is free from contamination of any type. The presence of contamination and/or hazardous materials in the subject property or on the subject site renders the value estimates in this report null and void. Site Data - 38 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Conclusion: The subject site is adequately suited for the existing apartment project. The physical and functional characteristics of the site are typical of those expected for the subject's property type. Street access is good. Access is adequate to the area. No other items were found that would detract from the utility of value of the site. Site Data - 39 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Flood Insurance Rate Map Site Data - 40 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Zoning Map Site Data - 41 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 ASSESSED VALUATION AND TAXES: The subject property is located in Maricopa County and valued by the county assessor for taxing purposes. The assessor's office is responsible for classifying and appraising all real property at current Market Value. Commercial and industrial real property is primarily appraised by use of a Multiple Regression Analysis Program, based on cost and comparable sales data. Since 1980, there has existed a unique two-tier property value system; primary (limited) valuation and secondary (full cash) valuation. This system controls wild fluctuations in the value of real estate from appreciation or inflation. Each property has a "limited" value that cannot exceed the "full cash" value. This "Limited Value" is based on the previous year's limited value increased by either 10 or 25 percent of the difference between the full cash value of the current year and the limited value of the prior years, whichever is greater, unless the property has been changed as defined in ARS 42-201.02C and D since the previous year. The current assessment ratios are listed as follows: Legislative Class 3 4 5 6 Assessment Ratio 25% 16% 10% 10% Property Type Commercial or industrial Agricultural, vacant land and other Owner-occupied residential Leased or rented residential There are also two tax rates: the primary rate and the secondary rate. The primary rate currently comprises the bulk of the overall tax rate and is applied to the limited value. The secondary rate is applied to the full cash value. The primary (limited) property taxes are for state, county, city governments, and school and junior college districts. The growth of actual tax levels for the primary rate is limited to an increase of 2 percent per year. Taxes are restricted in growth by limiting the increase in value of real estate by 10 percent per year over a base year (1979) or the year in which it was developed. For secondary (full cash value) property taxes, full cash value is used unadjusted to calculate tax levels for flood control, water provision, bonds, and overrides. Subject Property Tax Assessment History For 2005, the subject was identified as Maricopa County Assessor's Parcel Number 215-05-365. The real estate taxes for 2005 totaled $44,491.66. Assessed Valuation and Taxes - 42 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Tax Data Assessed Valuation and Taxes - 43 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Layout Assessed Valuation and Taxes - 44 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 IMPROVEMENT DESCRIPTION The subject is improved with 135-unit apartment project constructed in five detached two and three-story buildings. The unit mix includes 91 1BR/1BA units at 718 square feet and 44 2BR/2BA units at 889 square feet. Half of the one-bedroom units and half of the two-bedroom units have fireplaces. The net livable area 96,805 square feet with an average 763 square feet. Amenities include private balconies or patios, ceiling fans, washers/dryers, swimming pool and spa. Off-site improvements include paved street, curbs, gutters and streetlights. The following improvement description is based upon a physical inspection of the site by the appraisers made on March x, 2006. Improvements: Type of Property: The subject is an existing apartment project. Improved Area: 1BR/1BA @ 718 SF x 33 units = 1BR/1BA/FP@ 718 SF x 33 units = 2BR/2BA @ 889 SF x 22 units = 2BR/2BA/FP @ 889 SF x 22 units = Total Rentable Area (SF) Office/Recreational Building (SF) Gross Building Area (SF) Class/Type of Const: Marshall Valuation Service Class: Excellent Type: Excellent Number of Stories: Two and Three story buildings (6 buildings total). The office/recreation building is one story. Age: Actual Age -1987 Effective Age -10 Years Remaining Economic Life -- 40 years Land to Building Ratio: 2.55:1 Parking Lot: Paved - 166 total spaces (1.5 per unit). One covered and reserved parking space per unit. Layout: The subject consists of six apartment buildings and one office/recreation building. The buildings are clustered together on the west side of the project with lush landscaping running through the project. Improvement Description - 45 22,077 22,077 19,866 19,866 96,805 1,392 99,755 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 The office/recreation/pool area are located at the southern entrance to the project. The parking lot is runs along the north and west side of the project. A second entrance is located at the sites northwestern corner. Street/Curb/Gutter: Asphalt paved street; concrete walkway and sidewalk. Poured in place concrete vertical gutter on both 72nd Street and Redfield Avenue. Fencing: Masonry wall along the north and east sides. Landscaped buffer along the west and south sides (main entrance). Pavement: Parking Lot - Asphalt over ABC Sidewalks - Concrete over ABC Landscaping: Good landscaped with trees, shrubs, flowers, grass and ground cover. Landscaped is considered lush through the project. Automatic sprinklers and bubblers. Type of Soil: Native soil. No abnormal conditions observed. Finish Grading: Topsoil's amended to support landscaping. Finish grading covers total building area. Structural: Structure is stucco over frame supported by concrete slab-on-grade and foundation. The main floor has a concrete slab on grade. Lightweight concrete on plywood on floor joist between stories. Stairs/Landings/Walkways: Precast metal support beams with precast concrete treads. Wrought iron pickets and hand rails. Concrete landings. Carpentry: Wood frame interior partitions. Pre-engineered wood roof trusses. Exterior Walls: Painted stucco over frame. Six apartment buildings and the office have been remodeled with faux rocked exteriors. Roofs: Pitched roof with asphalt shingles. Recently re-roofed with high quality shingles. Improvement Description - 46 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Moisture Protection: Exterior walls: Ceiling below Roof: Roofing: Gutters/Downspouts: R-11 R-30 Insulation assumed. Yes Doors, Windows and Glass: Windows and Frames: Glazing: Doors and Frames: Vertical fixed and sliding aluminum anodized insulated windows. Single and double pane Exterior: Entry doors are solid core wood. Interior: Painted hardboard hollow core doors. Finishes: Grade, material: Acoustical texture ceiling, light texture wall finish. Valuated ceilings in the upstairs units. Half of the units have fireplaces. Carpet: Good quality. Kitchen cabinets are simulated wood grain. Kitchen tops are being upgrades as units become available from plastic laminate to granite and slate stone. Vanity tops are similarly being changed from plastic laminated or cultured marble to granite and slate stone. Exterior: Faux rocked and painted stucco over wood frame. Interior: Walls and ceilings painted. Painted wood baseboards and door trim. Painting: Floor and Wall Coverings: Living Room Kitchen Bedroom Bathroom Bathroom Accessories: Floors Carpet Travertine Carpet Travertine Walls Paint Paint Paint Paint Towel bar, toilet paper holder, mirrors, recessed medical cabinet. Specialties: Group anodized aluminum mail boxes. Equipment: Refrigerators: Kitchen ranges: Kitchen cabinets: Dishwasher: Improvement Description - 47 Good quality Electric range/oven combination. Being remodeled to stainless steel. Built-in. Built-in. … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Other: Furnishings: Garbage disposal, fan/hood, dishwasher, prewired for cable. Ceiling fans in all but 3 or 4 units. Vertical blinds. Mechanical: Fixtures: Sink, fiberglass/plastic tub/shower combination. Enamel cast-iron white lavatory, water closet. Domestic Water Heating: Domestic hot water provided by electrical hot water heaters in the individual units. Heating/Air Conditioning: Individual heating and air conditioning units. Each tenant is responsible for their own utility expenses. Ceiling fan(s) in most unit. Electrical: Electrical Wiring Per code. Electrical Fixtures: Ceiling or wall mounted fluorescent or incandescent per plan at various locations. Electric light standards: Outdoor lighting conforms to City code. Common Area Facilities: Office: Management office and recreation room are located on the south side of the complex. Similar type of construction. Laundry room: None. Each unit has a stacked washer/dryer. Pool: Fenced pool and spa is located directly northwest of the office/recreation room. Other: Good landscaping with walkways and BBQ's. Entry fountain. Vaulted ceiling in exercise room and office. Fire Protection: All of the units are sprinklered. Improvement Description - 48 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Easements and Restrictions: No adverse easements or restrictions were noted. No title report was provided to the appraisers. Contamination/ Hazardous Materials: Functional Utility/ Depreciation: It is unknown what, if any, hazardous materials are in use or have been in use on the premises. None were noted during the inspection. Overall, the functionality of the subject appears adequate. Conclusion: The subject is considered to be an excellent quality apartment in good condition located in an area of upper quality developments in north Scottsdale. It is considered to be similar with regards to construction, of the products found within the neighborhood. The improvements are adequately suited for the purposes for which they were designed. Improvement Description - 49 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 HIGHEST AND BEST USE Highest and best use is a fundamental concept in appraising real estate because it focuses market analysis on the subject property's optimum use given current market conditions. The Appraisal Institute has recognized highest and best use as: The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value.40 Implicit in the above definition are two different and distinct value estimates: the highest and best use as vacant and the highest and best use as improved. Highest and best use of a site as though vacant and available for development assumes that a parcel of land is vacant or can be vacated by demolishing existing improvements. The goal of the analysis is to ascertain the optimum use of the land if it is, or were, vacant and what type of improvement, if any, is warranted given market conditions. In growth areas and neighborhoods in transition or where a change in the near term is expected, an interim use may be appropriate. For instance, the highest and best use of a farm in the path of urban growth may be as a future shopping center with an interim use as a farm. Highest and best use implies contribution of that specific use to the community environment or to community development goals in addition to wealth maximization of individual property owners. Also, the estimate of highest and best use result from the appraiser's judgment and analytical skill, i.e., the use estimated from analysis represents an opinion, not fact to be found. In appraisal practice, the concept of highest and best use represents the premise upon which value is based. In the context of most probable selling price (market value), another appropriate term to reflect highest and best use would be the most probable use. In estimating the highest and best use of a property, the test is to forecast which program of future utilization is able to develop the highest net return on the land over a long period of time. Highest and best use does not necessarily refer to a building of the greatest size that someone might be induced to erect, nor does net income always need to be interpreted strictly in terms of money. It can take the form of amenities, such as an attractive wooded site best used as a park or game refuge. 40 The Appraisal of Real Estate, op. cit., 12th Edition, p. 305. Highest and Best Use - 50 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 An equally important consideration in developing a best use estimate is recognition of the fact that the appraiser's estimate for a particular property is dependent upon the type of value being estimated. Each type of value is based upon a particular set of conditions that are assumed to exist as of the date of valuation. Depending upon the purpose of a particular appraisal assignment, the best use estimate may vary depending upon the type of value being sought. In a market value assignment, a best use estimate is always developed from the perspective of potential purchasers/users who constitute an active market for the subject property. In many properties, the highest and best use conclusion may be identical to the one permitted by either zoning ordinances or private restrictions. There may be cases, however, where the land has a more valuable use than that permitted by law, and if there is a strong possibility that changing the legal use would be permitted, then it could properly be considered as a factor affecting value. Conversely, zoning could legally permit a use more intense than the site could reasonably be expected to perform. In such cases, if zoning will not permit a less intense use, then it is necessary to determine whether or not the zoning could be changed and the effect of this factor upon the ultimate utilization of the property. In ascertaining the highest and best use of a site or a property, it is necessary to study four factors:41 1. Legal Permissible Use - the uses that are permitted by zoning, existing leases and/or deed restrictions. 2. Possible Use - the uses that are physically possible; 3. Financial Feasible Use - the uses which are possible and permissible, which will produce a net return to the owner of the subject; and 4. Maximally Productive Use - the use of the subject site among the feasible uses that produces the highest net return. This use is essentially its highest and best use. Because of the subject is existing, both the highest and best use of the site "as if vacant" and "As Is", is considered. Highest and Best Use, As Vacant: 1. Legally Permissible: As discussed in the Site Data Analysis section of this report, the subject site is zoned R-5, Multifamily residential, City of Scottsdale. Under this zoning classification, the subject's existing improvements are considered a legal use of the site 41 The Appraisal of Real Estate, 12th ed., op. cit., pp. 307. Highest and Best Use - 51 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 2. Physically Possible: The next constraint imposed on the use of the subject property is primarily dictated by the physical aspects of the site itself. Size, shape, and topography affect the uses to which land may be developed. The subject property is generally rectangular and does not appear to suffer due to any slope irregularity. The site has an adequate frontage to depth ratio and is approximately 5.0 Acres (217,800 SF), 4.02 net acres (175,147 SF) in size. It is at grade with the fronting streets and adjacent properties and is not adversely affected by any known easements which would restrict its utility. All public utilities are available and at the property line. Primary access from the major fronting arterial is by a curb cut at the northeast corner of the property. According to the Flood Insurance Rate Maps, the subject site is not located within a hazardous flood plain area. It is not located within a State or Federal SuperFund Site. Our analysis of the physical characteristics of the site, as vacant, indicates a number of physically possible uses for the subject parcel; however, from a practical standpoint these are limited to apartments. 3. Financially Feasible: In determining which uses are legally permissible and physically possible, we have eliminated many uses from consideration (residential or agricultural). The appraisers are of the opinion that it would be currently financially feasible to develop the subject site, if vacant, with a use acceptable under the R-5, Multifamily residential, City of Scottsdale zoning designation or be held for future use or resale. 4. Maximally Productive: Developed uses for the subject site which were found to be financially feasible included residential use. Development as such or to hold the site for future resale or development constitute the highest and best use of the as if vacant. Highest and Best Use, As Improved: 1. Legally Permissible: As discussed in the Site Data Analysis section of this report, the subject site is zoned R-5, Multifamily residential, City of Scottsdale Under this zoning classification, the subject's existing improvements are considered a legal use of the site. 2. Physically Possible: The existing improvements are located within a multifamily use area along a major arterial. Utility availability is considered typical and adequate to support the existing improvements, and no physically adverse conditions are believed to affect Highest and Best Use - 52 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 the subject site. The developed land-to-building ratio is within the general coverage ratio guidelines for zoned districts. Based on the foregoing, it appears the existing improvements, are physically possible and reasonable for the subject site. 3. and 4. Financially Feasible and Maximally Productive: A real estate project is financially feasible when analysis indicates that there is reasonable likelihood of satisfying explicit objectives and when a selected course of action is tested for fit to a context of specific constraints and limited resources. Financial feasibility of a real estate project is normally related to its probable economic potential. Of the financially feasible uses, the use which produces the greatest value consistent with the rate of return expected by the market for that use is recognized as the Highest and Best Use. The subject property is currently 88% leased. This property has been analyzed in the valuation section of this report using the assumed market cash flows and projected expenses to offer an indication of the net cash flow to ownership. We believe that the final test of maximal productivity of the subject property, as improved, is positively met. Conclusions of the Highest and Best Use: Since zoning and regulation of community plans tend to take precedence over private wants and aspirations, the decisions as to Highest and Best Use must be considered within the framework of public limitations. Finally, the Highest and Best Use is a logical and appropriate use or range of uses that fall within the constraints of private wants and public standards, presuming that all are working within the guidelines of the real estate market. In general, decisions would be rational, not arbitrarily arrived at, and would function in the scope of good planning and reasonable productivity of use. Therefore, we conclude the following: ‚ The existing project is considered Technically Feasible as it meets the test for legal, zoning and probability within existing market standards. Additionally, government services and planning are considered good. ‚ The development is considered "Long Term" Market Feasible because: 1. There is long-term demand in the marketplace. 2. The demographics suggest stability for the neighborhood. ‚ "As If Vacant" the subject should be held for future development Apartments or held for resale. Considered "As Is," the Highest and Best Use is its existing apartment project use. As improved, it appears that the land and improvements have all the physical attributes which would signify a successful project, as its Highest and Best Use. Highest and Best Use - 53 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 102680 Street access and visibility are adequate with access provided for vehicular and pedestrian traffic. The present use is a legal use and conforms to current zoning and land use regulations, considering the property's anticipated future use, the subject appears to be most appropriate thus no alternative use is recognized for the improvements. Highest and Best Use - 54 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX VALUATION PROCESS Typically, real estate can be valued by applying three approaches, e.g., Cost, Income and Sales Comparison. In addition, the site or land valuation is typically analyzed by the usage of the sale comparison methodology. The three are defined as follows:42 COST APPROACH That approach in appraisal analysis which is based on the proposition that the informed purchaser would pay no more than the cost of producing a substitute property with the same utility as the subject property. It is particularly applicable when the property being appraised involves relatively new improvements which represent the highest and best use of the land or when relatively unique or specialized improvements are located on the site and for which there exist no comparable properties on the market. INCOME APPROACH That procedure in appraisal analysis which converts anticipated benefits (dollar income or amenities) to be derived from the ownership of property into a value estimate. The Income Approach is widely applied in appraising income-producing properties. Anticipated future income and/or reversions are discounted to a present worth figure through the capitalization process. SALES COMPARISON APPROACH Traditionally, an appraisal procedure at which the market value estimate is predicated upon prices paid in actual market transactions and current listings; the former fixing the lower limit of value in a static or advancing market (price wise), and fixing the higher limit of value in a declining market; and the latter fixing the higher limit in any market. It is a process of analyzing sales of similar recently sold properties in order to derive an indication of the most probable sale price of the property being appraised. The reliability of this technique is dependent upon (a) the availability of comparable sales data, (b) the verification of the sales data, (c) the degree of comparability or extent of adjustment necessary for time differences and (d) the absence of non-typical conditions affecting the sale price. In essence, all approaches to value (particularly when the purpose of the appraisal is to establish market value) are market data approaches since the data inputs are presumably market derived. The subject is a 20 year older apartment complex. The Market Value of the As Is Leased Fee Interest of the subject property is being valued. Therefore the Cost Approach was not considered applicable and only the Sales Comparison and Income Approaches are presented herein. 42 Byrl N. Boyce (ed.), Real Estate Appraisal Terminology, American Institute of Real Estate Appraisers and the Society of Real Estate Appraisers (1st ed. rev.; Cambridge; Ballinger Publishing Co., 1981), p. 62, 126.132, 160. Valuation Process - 55 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX SALES COMPARISON APPROACH The Sales Comparison Approach is one of three traditional approaches to value. This approach is also called the Market Data or Market Comparison Approach. It is: Approach through which an appraiser derives a value indication by comparing the property being appraised to similar properties that have been sold recently, applying appropriate units of comparison and making adjustments, based on the elements of comparison, to the sale prices of the comparables.43 Basic real estate appraisal principles involved in this approach are the principle of substitution, anticipation and contribution. The "principle of substitution" is the underlying premise from Sales Comparison Approach and its definition is very similar to that of the approach itself. This principle fundamentally states that the value of a property is influenced to a large extent by the prices being paid in the open market for similar properties offering the same utility. The market that is made up of substitute properties then represents alternatives for a prospective buyer and tends to set the range of values. The "principle of anticipation" states that prices paid for property is a reflection of the market's expectation of future benefits that accrue from ownership. It follows, then, that if the property is old and nearing the end of its economic life, or for another reason has a dismal future, the present worth of value of all future benefits would be considerably lower than if the property was new and could generate benefits for a longer period. The value of real property, therefore, can be considered the present worth of all future benefits that can be derived from its ownership. The "principle of contribution" is the underlying rationale for the adjustment process in the Direct Sales Comparison Approach. This principle views the sale price of real property as the sum of all value contributing characteristics. The individual characteristics are measured by the effect their presence or absence has on the total sale price. Not only is their mere presence important, but also the quantity and quality in which they exist. There are other appraisal principles involved in Direct Sales Comparison, but the three mentioned are considered most pertinent. COMPARABLE SALES DATA Five sales considered most comparable to the subject follow. 43 The Dictionary of Real Estate Appraisal, 2nd ed., op. cit., p. 265. Sales Comparison Approach - 56 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale No. 1 Photograph Sale No. 1 Plat Map 150 151 152 217-5 3-139 217-5 3-140 61 34 -204 2 7- 74 ROAD -20 21 7- 74 -201 -200 217 - 74 7- 74 21 7- 74 -1 2 17 99 - 74 -1 98 21 -2 1 -196 -197 -1 9 0 21 1 7- 74 -1 9 21 21 7- 74 21 -1 7- 74 93 2 17 - 74 21 -1 9 7- 74 5 -1 9 7- 74 4 -1 9 1111 0 06 8 1111 0 04 7 1 11 1 05 03 2 21 21 7- 74 7- 74 -2 08 21 -212 7- 74 7- 74 -18 -18 21 -18 7- 74 4 -18 217-36-07 6 21 7- 74 6 3 2 8 1 -1 69 21 0 -1 7 7- 74 67 -1 7- 74 21 7- 74 -1 68 - 74 217 21 -1 66 - 74 2 17 -1 65 7- 74 -1 6 4 34 7- 74 21 7- -1 3 74 -1 5 21 2 33 7- 74 7- -1 3 74 -1 0 31 21 7- 74 -1 61 -1 60 -1 3 21 7- 9 3 74-15 217- 74-1 49 74-1 52 217- 217- 217- 3 6 74-14 74-1 51 1 PIMA 74-15 7 7- 74 74-1 59 8 217- 74-15 217- 37 7- 74 217- 74-15 4 74-15 21 -1 4 74-15 6 74 -1 0 217- -1 4 217- 7- 7 21 7- 74 -1 -1 3 36 5 38 7- 74 7- 74 7- 74 21 -1 0 74 -1 7- 74 3 -1 6 -162 7- 74 21 - 74 2 17 74-15 7- 21 74-1 45 33 -17 -18 2 17 1 - 74 -18 0 9 21 21 74-14 56 175-57-180 175-57-181 -17 7- 74 9 21 7- 175-57-183 36 175-57-203 -1 7 7- 74 74-14 7412 2 Y WA 32 7- 74 21 -1 27 21 175-57-179 175-57-173 7- 74 7- 74 21 21 7- 21 5 217- 27 7412 28 74-1 48 21 7- 217- 175-57-178 7- 74 -1 24 6 7- 7 4 -1 21 31 -189 217 - 74 -1 8 -1 8 8 5 21 7- 7- 74 -1 2 21 21 175-57-175 28 26 7- 74 21 175-57-174 7- 74 21 7- 74 -1 21 7- 7 4-12 3 74-14 TE 21 21 29 7- 74 -187 7 21 4 175-57-177 30 7- 74 5 21 21 175-57-176 -17 8 217- 65 175-57-213 66 11 74-14 I DR 7- 74- 7- 7 21 4-11 7- 7 9 4-12 2 21 7- TH 87 175-57-212 -1 7 -1 20 21 VE 7- 74 21 21 60 175-57-211 64 7- 74 7 21 175-57-207 21 21 7- 74 2 17 - 74 21 21 6 21 61 175-57-210 63 21 4 21 7- 74-11 175-57-208 2 21 21 2 217- 74-11 62 -1 7 4 217 7- 74 74-1 73 -17 6 217- 74 -103 217- 74-1 05 217- 74-11 3 217- 74-11 5 175-57-209 -2 09 7- 74 217- 74 -104 217- EW 21 2 17- 74-101 10 5 5 10 51 70 56 10 5 90 5 1 8 10 6 10 6 0 7 10 61 10 6 90 68 1 10 61 30 62 10 71 10 70 10 61 50 64 10 7 2 10 6 6 VI 217 - 74 -1 7 217- 74 -100 21 7- 74-102 1 217- 74-11 A IN NT OU 217 - 74 7 9 0 217- 74-11 AD RO 7- 74 21 8 217- 74-10 217- 74-11 3 21 7- 74-10 217- 74-10 217- 74-11 175-46-650 21 2 17 - 74 10 10 85 81 1013 1 70 11 1 0 14 1 10 0 8 86 10 15 001 2 190 1 10 16 10 17 1 0 9 01 10 88 1018 10 25 810 90 10 99 10 27 10 10 26 97 31 10 10 1 10 28 10 29 10 91 0 9 31 30 10 120 40 996 10 30 10 32 9 5 91 3 3150 34 10 36 10 10 37 3190 84 83 81 10 38 10 8120 8100 9 4110 7 10 10 40 78 10 10 10 0 77 175-57-206 42 217-74-308 16 10 10 10 07 5 59 47 415 4TRACT 1 3 CE 7140 7 10 10 0 48 46 44 175-57-205 10 73 1 10 0 4 10 58 9 511 0 10 5 513 0 175-57-204 10 0 52 57 54 217- 74 -106 10 19 10 21 10 20 10 23 10 22 10 24 4 21 -2 07 2 17 - 74 21 -2 14 7- 74 21 0 7- 74 21 -2 11 217- 74-088 3 217- 74-08 9 217- 74-09 1 217- 74-090 217- 74-09 2 17 - 74 2 10 10 0140 06 05 10 012 0 03 10 01 4 217- 74-09 217- 74-09 6 217- 74-09 8 9 217- 74-09 7 217- 74-095 217- 74-09 217- 74-09 IL 10 07 10 12 10 10 10 11 10 08 10 09 U -215 217 - 74 -217 2 17 7- 74 74 -2 16 -2 1 3 6 O 21 -0 8 N M IN A NT -205 7- 74 -148 53 85 53 217 7- 74 74-206 -20 3 -1 43 7- 53 7 21 -1 4 7- -0 21 7- 53 5 1166 6 21 84 6689 -0 -1 21 7- 53 7- 53 7- 53 53 175-46-651 N CE 1 11 1 30 281 1 11 11 29 24 11 2611 27 11 25 22 11 23 11 21 1 11 1 20 18 11 11 19 1161 17 11 11 11 111 15 110 121 14 1 1 13 11 1 09 21 21 21 IA T BA RA B 2 17-53-1 52 21 7- 217-5 3-158 VI W 164 21 7-53-14 9 176 M 162 217-5 3-146 167 753 2 1 -1 5 7- 53 4 -1 5 5 TR A -1 42 0 1166 1 9 C TRA 67 70 21 5 VI E 21 7-53-14 4 1177 170 21 173 175-46-652 159 7- 53 -07 64 21 7-53-08 3 73 D 217-5 3-141 21 8 - 53 2 17 21 7-53-0 80 -0 7 6623 - 53 217 74 217-5 3-089 RO A 217-53-077 217- 92 1 53 -0 -0 9 72 1 1 7- 53 2 217-53-090 76 75 175-57-202 55 175-57-182 35 I VE DR 175-57-201 175-57-184 175-57-200 37 175-57-199 175-57-185 38 VI O CT R 54 53 217-36-343N 52 Sales Comparison Approach - 57 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale #1 8787 E Mountain View Rd Scottsdale Rancho Antigua Buyer Rancho Antigua Condominiums, LLC The Continental Group 20701 N Scottsdale Rd Suite 107 Scottsdale AZ 614-1558 County: Submarket: Map(Page): Legal: Maricopa Scottsdale North 106 - 175/LL Por SE4 sec 25 T3N R4E & por SW4 sec 30 T3N R5E Intended Use: Frontage: Apartments n/a Seller Income and Expenses DOC Investors, LLC Con Am Management 3990 Ruffin Rd Suite 100 San Diego CA 614-7331 The selling broker indicated that the property was 94% occupied at time of sale that the property will be converted to condominiums. Vital Data Sale Price: $23,150,000 Doctument: WD Building SF: 217,758 Price/SF: Topography: Cap Rate: Down Pmnt: Pct Down: Doc No: No. Units Price/Unit: Recording Date: Escrow/Contract: Days on Market: Exchange: Conditions: Zoning: Frontage: Comp No: Property Type: $106.31 Level n/a $250,000 1% 214808 220 $105,227 02/23/2005 n/a N/Ap No Condo Conversion R-5 PCD, Scottsdale n/a PXA-37187-03-0520 Apartment Comments: * Sale Price: The selling broker reported the property sold 'as is'. However, prices for the condominiums will range between $120,000 to $300, 000 per unit. Amenities: Balcony, Cable TV, individual metered, patio, pool (3), rec room, spa, individual washer/dryers. Parcel Information Parcel Number: 217-36-075 SF Gross: SF Net: Price/SF Gross: Price/SF Net: Improv Ratio(%): 619,989 619,989 $37.34 $37.34 80 Lot Dimensions: Confirmed: Irregular Public records Prior Sale Docket 86482 01/29/1999 Sales Price $13,700,000 Property Characteristics Yr Built 1985 SF 217,758 Units 1BR 2BR 3BR Number 60 140 20 Parking Garages Bldgs 22 Stories Construction 2 Frame/stucco 388 of which 220 are covered None Parking Ratio Listing Broker CB Richard Ellis Sean 1.76 Buyer Broker R.H. Crain & Associates, LLC Dick Crain Cunningham Financing TD's Lender 1st Corus Bank Title Co: First American The buyer plans to convert the property to condominiums. Plans have not been finalized. No costs have been estimated for the conversion at this time. Balance $22,900,000 Payment n/a Sales Comparison Approach - 58 Condition Good … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale No. 2 Photograph Sale No. 2 Plat Map 214-34-069 6 5 16 25 214-34-146 214-34-153 17 24 L ANE 214-34-061 214-34-147 214-34-058A 214-34-152 23 61 214-34-151 214-34-065 214-34-066 214-34-067 214-34-068 1 2 3 4 22 214-34-150 21 18 39TH B EC K 214-34-148 58 57 214-34-057A 40TH 214-34-070 214-34-071 7 8 214-34-057C 214-34-072 19 214-34-149 20 ROAD GREENW AY ROAD GREENW AY 214-63-347 85 214-63-343 214-63-346 81 STREET 84 214-63-345 214-63-344 83 82 DR IVE 214-63-002E 214-63-002F 214-63-349 87 214-63-348 86 123 214-63-384 214-63-360 122 98 214-63-383 214-63-361 121 99 STREET 214-63-385 214-63-002G 214-63-382 120 214-63-362 100 214-63-381 119 214-63-363 101 214-63-380 118 214-63-364 102 40TH 214-63-379 117 214-63-377 Sales Comparison Approach - 59 TRACT E 7 1 214-63-896 15 214-63-888 214-63-928 214-63-376 214-63-883 214 -63 -9 30 214-63-002D 214-63-375 214-63-887 38TH 214-63-378 116 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale #2 3850 E Greenway Rd Phoenix Rancho Mirado Buyer S & F Conversions, LLC Steven Caviness 8350 E Evans Rd Scottsdale AZ Seller County: Submarket: Map(Page): Legal: Maricopa Paradise Valley 104 - 168/LH Por N2 W2 NE4 NE4 sec 12 T3N R3E; Intended Use: Frontage: Apartments n/a Easement Income and Expenses Condominium, LLC Elias J. Winzeler PO Box 81316 Phoenix Condo conversion project. AZ Vital Data Sale Price: $7,590,000 Doctument: SWD Building SF: 63,840 Price/SF: Topography: Cap Rate: Down Pmnt: Pct Down: Doc No: No. Units Price/Unit: $118.89 Level n/a $230,000 3% 1812046 66 $115,000 Recording Date: 11/30/2005 Escrow/Contract: Days on Market: Exchange: Conditions: Zoning: Frontage: Comp No: Property Type: n/a N/Av N/Av Condo Conversion R3-A, Phoenix n/a PXA-13747-01-0620 Apartment Comments: Apartments being converted to condos. Amenities: Balcony, Cable TV, individual metered, patio, pool (3), rec room, spa, individual washer/dryers. Parcel Information Parcel Number: 214-63-002E SF Gross: SF Net: Price/SF Gross: Price/SF Net: Improv Ratio(%): 290,400 290,400 $26.14 $26.14 80 Lot Dimensions: Confirmed: 605 x 480 Public records Prior Sale Docket 1424387 12/31/2002 Sales Price $4,600,000 Property Characteristics Yr Built 1988 SF 63,840 Units 1BR 2BR Number 32 34 Parking Garages Bldgs 3 126 of which 66 are covered None Parking Ratio Stories Construction 1 Frame/stucco 1.91 Listing Broker Buyer Broker Unknown Unknown Financing TD's Lender 1st Stearns Bank of Arizona Title Co: Chicago Balance $7,360,000 Payment n/a Sales Comparison Approach - 60 Condition Average … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale No. 3 Photograph 51 .5 0' Sale No. 3 Plat Map 1' .3 57 300' 680.51' 135 134 167-16- 165167-16- 164 167-16- 163 167-16- 162 13 2 133 13 1 12 9 130 167-16- 170 149 167-16- 157 167-16- 171 139 167-16- 185 167-16- 184 150 13 8 15 1 142 124 167-16- 158 144 167-16- 175 167-16- 173 14 0 167-16- 155 167-16- 177 167-16- 176 125 123 167-16- 159 167-16- 161 128 TRA CT CE 15 2 167-16- 154 12 1 127 12 6 167-16-270 14 1 122 167-16- 160 14 3 167-16- 174 167-16- 156 120 167-16- 146 167-16- 141 167-16- 139 S89d03m44sW 62.00' 62' 108 167-16- 134 10 6 167-16- 136 133.00' 133' 101 107 167-16- 135 102 103 11 3 167-16- 148 167-16- 147 167-16- 138 10 5 167-16- 137 104 11 5 167-16- 149 114 167-16- 145 167-16- 144 118 11 0 116 167-16- 142 119 11 2 167-16- 143 11 1 11 7 10 9 S89d0 3m44sW 537.18' VILL AGE L=23.5 1' R=30' 167-16- 140 167-16- 150 167-16- 151 167-16-152167-16- 153 13 7 167-16- 172 PAR KWAY L=13.61' R=20' NORTH 393.52 ' Sales Comparison Approach - 61 163.18' 22 S sW 246' 02m.5 5 2 d 43 .4 6' BOULEVARD 167-16-183167-16- 182 136 145 S01d22m52sE 402.37' N00d 56m16sW 293.02' 293.02' 167-16- 169167-16- 168167-16- 167167-16- 166 167-16- 179167-16- 178 147 14 6 TATUM BOULEVARD 167-16- 181167-16- 180 14 8 TATUM 611.9 9' … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale #3 4704 E Paradise Village Pkwy N Phoenix Taos Condos (Paradise Pt. Apts.) Buyer 4704 Paradise Point, LP Timothy W. Clark 1020 Prospect St Suite 314 La Jolla CA 456-0014 County: Submarket: Map(Page): Legal: Maricopa Paradise Valley 105 - 169/LJ Por SE4 NE4 sec 18 T3N R4E; Easement Intended Use: Frontage: Apartments n/a Seller Income and Expenses Elmsford Retirement Center H. Howard Sahnow 2030 Elm St Forest Grove OR 357-1540 Gross Scheduled Inc. Vacancy Vital Data Per Unit 0.1465 $1,254,960 $183,852 $1,071,108 Property Tax Other Exp. $72,160 $331,572 Total Exp. $403,732 Net. Annual Income $667,376 Sale Price: $10,325,000 Doctument: SWD Building SF: 130,920 GIM: Price/SF: Topography: Cap Rate: Down Pmnt: Pct Down: Doc No: No. Units Price/Unit: $78.86 Level n/a $4,175,000 40% 997279 136 $75,919 Cap Rate: Recording Date: 07/19/2005 Escrow/Contract: Days on Market: Exchange: Conditions: Zoning: Frontage: Comp No: Property Type: n/a N/Ap No Condo Conversion PAD, Phoenix n/a PXA-41291-08-0520 Apartment 8.23 6.46% Comments: Condo conversion project. Amenities: Parcel Information Parcel Number: 167-16-001H SF Gross: SF Net: Price/SF Gross: Price/SF Net: Improv Ratio(%): 250,688 250,688 $41.19 $41.19 80 Lot Dimensions: Confirmed: Irregular Public records Prior Sale Docket 597490 12/20/1991 Sales Price $4,650,000 Property Characteristics Yr Built 1984 SF 130,920 Units 1BR 2BR Number 40 96 Parking Garages Bldgs 9 176 of which 136 are covered None Parking Ratio Listing Broker Sperry Van Ness Julie Stories Construction 2 and 3Frame/stucco 1.29 Buyer Broker Sutton Realty Thomas Vaughn Hope Financing TD's Lender 1st Merrill Lynch Capital Title Co: Fidelity National Title Balance $17,780,572 Payment n/a Sales Comparison Approach - 62 Condition Average $2,969 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale No. 4 Photograph Sale No. 4 Plat Map 88 217-48-736 217-26-5 78 80 -5 26 21 7- 1 10 0 4 43 2 81 1052 1053 1049 1044 1054 1048 1056 1045 1055 1016 1022 1017 1018 1019 1021 1020 26 7- 85 -5 26 7- 84 21 26 7- 21 -5 56 217 - 26 00 2 17 - 2655 21 21 7- 26 21 -60 7- 1 26-6 22 17 -6 -6 26 26 7- 7- 21 21 18 -6 -6 26 -5 5 -5 5 1028 1027 217-26-565 95TH 217 -26-569 PLAC E 21 7-2 6-56 7 1030 1029 217-26-568 9 217-48-733 8 5 7 -2 5 - 5 6 7 R 217- 26-603 1 217-26-605 2 26 7- 7- 21 21 7-26 -560 2 17 - 26 3 21 21 7-26 -570 217- 26-56 -5 55 4 2 17 - 26 217-26-606 19 217 -26-571 8 1032 1031 217 -26-566 64 217- 26-5 -5 5 61 217- 26-5 7- 26 7- 26 62 217- 26-5 21 217-26-602 -6 217-26-574 217 -26-583 10 26 10 25 10 24 10 23 26 217 -26-572 217-26-582 21 217 -26-616 2 17-2 6-6 15 21 217-26-5 75 2 17-2 6-58 6 21 7-2 6-59 3 2 17-2 6-6 08 2 17-2 6-6 20 217-26-579 217- 26 -573 1035 1034 1033 1037 1036 -5 21 7-2 6-60 9 7- 217 -26-592 1 10 0 4 46 7 21 7-26 -610 10 180 10 7 1 10 80 10 9 83 84 2 17-2 6-5 87 217-26-594 2 17-2 6-61 1 217-26-6 07 217-26-5 91 7 217-26-612 -5 217-26-5 96 217-26-613 1040 1041 21 1076 1075 1074 1073 1072 1071 1070 1078 1077 1062 10691063 1068 1064 1065 1082 1067 1066 217- 26-577 -5 217-26-590 217- 26-576 98 26 -5 26-5 97 217- 217- 26 217-26-589 95TH 217-26-614 7- 1050 1051 217-26-5 95 10 39 10 38 21 217 -26-599 1061 1060 1059 1057 1058 1008 1015 1009 1010 1014 1013 1006 1011 1007 1012 1005 1086 1087 1004 1092 1088 1003 1089 1094 1090 1002 1095 1091 1001 1097 1096 1104 1102 1103 TRACT CE 1101 1100 1099 1098 2 17-2 6-5 46 21 7-26 -604 3 -5 5 217-26-547 26 1 7217-26-552 2 217 -26-548 9 21 7-2 6-55 1 -5 4 7- 26 21 217 -26-545 217-26-544 21 217-26-550 7- 26 -6 2 217-26-543 3 85 10 217-26-624 217- 26-631 10 93 217-26-625 21 7-26 -630 217-25-567J 21 7-26 -542 217-26-626 21 7-26 -541 217-26-627 2 1 7 - 2 5 - 5 6 7 N 21 7-26 -632 217-26-628 217-48-731 217-26-5 40 3 217-26-633 217-26-629 21 7-26 -634 2 17-2 6-53 9 217-26-6 35 217-26-642 21 7- 26 -6 2 40 9 26-63 38 21 7- 7- 26 -6 21 21 7- 26 -6 37 2 17-2 6-63 6 217-48-730 2 17-2 6-85 5 21 7-26 -641 -7 3 9 1 00 2 B1 00 1 5 B 0 6 B 1008 0 B1009 B1010 B 1011 B 1100 B 1007 B1012 B B1013 B1014 21 7- 26 21 3 00 4 B 1 00 B1 7- 26 21 7- 26 -7 4 0 -7 4 217 -26-746 7- 26 -7 21 2 17-2 6-74 9 -7 4 7- 26 1 21 43 2 21 6 7- 2 -7 4 4 217 -26-747 2 17-2 6-7 48 21 7-26 -745 217 -26-752 2 17-2 6-7 51 217-26-7 50 217-26-795 B1056 B1055 B 1057 B1049 B1054 B1050 B 1058 B1059 B1060 B1053 217-26-794 217 -26-793 2 17-2 6-7 92 217-26-797217-26-7 98 B 10 51 B 205 1 B 10 41 B 704 8 21 7-26 -788 217-26-787 217-26-7 91 21 7- 2 217- 26-790 217 6-785 - 26-7 217- 2 89 6-786 7 B1016 1 80 1 1 B1015 22 B 10 2110 B B B1019 10 B B1046 B1045 B1020 B1024 B 1023 217-26-796 217-26-783 217-26-7 84 21 4 04 9 2B413 0410 1003 B 1 B 10B4 B 7- 26 -780 21 7-26 -779 -782 7 7- 26 -7 7 21 - 26 17 -781 2 7- 26 -7 78 21 7- 26 21 B 1041 217-26-757 217-26-7 54 55 -7 6 0 217-26-753 26 -7 7- 26 2 1 1 75659 2 26 -7-7 7- 26 2 12 1 7- 217-25-567P 217-26-7 58 217-26-761 217 -26-762 21 7-26 -763 B1025 203 1 B1 B103 B1033 B1030 B1026 6 3 503 B1034 B 10B1 B1029 B1028 B1027 217-26-771 217-26-7 72 217-26-768 26 -769 21 7- 26-77 03 21726 -774 21 7- 26-77 217- 217-26-767 217-26-7 64 21 7-26 -765 217-26-7 66 217-26-775 B1037 B1038 217 -26-776 BOULEVARD SHEA Sales Comparison Approach - 63 BOULEVARD … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale #4 9450 E Becker Ln Scottsdale Adventura (Scottsdale Cove) Buyer Montecito Cove, LLC Montecito Property Co 333 N First St Jacksonville Beach 339-0091 County: Submarket: Map(Page): Legal: Maricopa Scottsdale North 106 - 175/LK Por SE4 SE4 sec 19 T3N R5E; Easements Intended Use: Frontage: Apartments n/a FL Seller Income and Expenses BRE Properties Inc Mark Petersen 44 Montgomery St San Francisco 445-6530 Selling broker reported that the property sold at a 5.05% cap rate based on a tralling 12 months income at the time of sale. The property was reported to be about 95% occupied. CA Vital Data Sale Price: $36,450,000 Doctument: SWD Building SF: 295,951 Price/SF: Topography: Cap Rate: Down Pmnt: Pct Down: Doc No: No. Units Price/Unit: $123.16 Level n/a $3,950,000 11% 346148 316 $115,348 Recording Date: 03/22/2005 Escrow/Contract: Days on Market: Exchange: Conditions: Zoning: Frontage: n/a apx 157 No Condo Conversion C-2, Scottsdale n/a Comp No: Property Type: PXA-54349-04-0520 Apartment Comments: Condo conversion project. Amenities: Balcony, business center, club house, covered parking, gym, patio, pool (2), spa (2), washer and dryer hook-ups. Parcel Information Parcel Number: 217-25-567K, 567Q SF Gross: SF Net: Price/SF Gross: Price/SF Net: Improv Ratio(%): 940,896 940,896 $38.74 $38.74 80 Lot Dimensions: Confirmed: Irregular Public records Prior Sale Docket Sales Price Property Characteristics Yr Built 1991 and 1994 Units 1BR 2BR 3BR SF 295,951 Stories Construction 2 Frame/stucco Number 94 177 45 Parking Garages Listing Broker CB Richard Ellis Tyler Bldgs 23 525 of which 350 are covered None Parking Ratio 1.66 Buyer Broker Buyer is broker - represented self Anderson Financing TD's Lender 1st Merrill Lynch Capital Title Co: First American Balance $32,500,000 Payment n/a Sales Comparison Approach - 64 Condition Good … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale No. 5 Photograph Sale No. 5 Plat Map BO ULEVAR D SH EA SH EA BOULE VARD SHEA TRACT B -0 1 6 168 -05-356 168-05 -359 168-0 5-360 8 168-05-478 16 8-05-481 1002 1003 1001 1004 1007 1006 1008 1005 8 -3 168-05-473 1126 1125 1124 1119 1127 1123 1118 1121 1120 1122 168-05-358 168-05-357 168-05-36 1 168-05-362 16 8-05-363 168-0 5-480 168-05-47 9 16 8-05-474 168-0 5-475 168-05-47 6 168-05-477 168-05-47 2 168-05-470 4 5 168-05-301 4 168-05-471 168-05-307 -3 -0 168-05-303 8 168-05-305 6 168-05-313 1116 9 5 1 168-05-311 1117 7 5 3 1 9 11 13 15 17 COMMON A REA 19 168-05-309 168-05-468 1114 1115 168-05-469 168 -05-315 168 -05-317 -3 8 1 -0 4 STREET 1 6 8 - 0 5 - 35 1 1 6 8 - 0 5 - 35 0 168-05-208 168-05-206 168-05-205 168-05-204 168-05-203 168 167 166 165 7 5 6 168-05-319 168 -05-364 168-05-371 5 168 -05-367 168-05-3 68 168-05-327 31 168-05-372 168-05 -331 1018 1019 168-05-213B 168-05-373 3 1104 1101 1100 1024 1105 1025 1026 1027 1029 1092 1099 1028 1 68-05-459 168-0 5-376 168-05-3 78 -0 1 6 5 4 2 -3 168-05-38 3 8 37 39 05-339 168- 05-402 05-4 168- 8 10 49 10 4 168- 16 8-05-405 TRACT CE 03 168-05-4 01 168-05-40 6 168-05-384 16 8-05-391 1032 1031 1036 1035 168-05-4 04 99 05-39 168-05-385 168-05-386 168-05-389168-05-390 16 8- 05-3 168- 168-05-408 5 10 444 10 168-0 5-407 8 168-05-2 46 168-05-409 33 35 37 39 41 64 43 168-0 5-248 168-05-250 168-05-444 1090 1091 168-05-387 168 -05-388 168-05-445 1033 1034 168-05-41 1 1057 1056 1058 1059 1060 1061 ALAN 1087 1086 168-05-440 168- 05-438 168-05-169 131 168-05-168 168-05-167 130 129 168-05-43 7 168-05-418 168-05-419 168-05-43 6 16 8-05-397 168-05-396 168-05-146 168- 05-435 168-05-416 1080 1081 1063 1062 1064 1065 1066 1067 1069 1068 168- 05-434 1 68-05-395 168-05-4 17 168-05-213A 168-05-170 132 16 8-05-394 168-05 -415 168-05-002N 168-05-174 136 1038 1039 1083 1040 1082 1041 1043 1042 168-05-393 16 8-05-414 168-05-256 168-05-173 135 168-05-441 1085 1084 168-05-413 168-05-254 168- 05-439 16 8-05-392 168-05-412 168-05-172 134 1096 1095 168-05-410 1 68-05-252 168-05-171 133 168-05-449 16 8-05-450 1030 1037 168-0 5-400 168-05-244 168- 05-452 168- 05-451 168- 05-447168- 05-448 168-05-596 1 6 8 - 0 5 - 3 4 1 1051 1050 1047 1052 1046 1053 1054 1055 168-05-242 168-05-185 147 168-05-446 168 -05-453 1 68-05-382 168-05-3 37 1 68-05-240 168-05-186 148 1 68-05-381 168-05-335 168 -05-238 168-05-187 149 168-05-188 150 168-05 -380 1097 1098 1094 1093 TRACT A 108 168-05-145 107 168-05-147 16 8-05-420 168-05-4 21 106 4 -42 8- 05 168-05-148 -4 25 16 168 - 05 168-05-4 22 109 168-05-144 168-05-423 10 10 70 71 110 168-05-426 1072 1073 1075 1074 168-05-143 168-05-427 105 3 168-05-149 16 8 - 0543 1 10 10 76 77 168-05-117 43 0 168-05 -429 168-05-428 168-05-211 16 8 - 05- 168-0 5-236 23 25 27 29 31 168-05-454 1 68-05-379 168-05-333 PLACE 33 35 168-05 -377 1023 1022 168-05-192 154 54TH 4 5 168-05-191 153 168-05-455 54TH -0 6 16 8-05-458 168- 05-442 -3 8 1 1110 1109 168- 05-456 4 168-05-190 152 1089 1088 -3 -0 168-05-189 151 CAN NON 168 -05-463 168-05-464 1013 1012 4 5 8 168- 05-457 6 1 1103 1102 168-05-329 168- 05-443 4 5 6 168- 05-461 168- 05-462 168- 05-465 168- 05-466 -0 1108 1107 1112 1111 8 1 1113 1106 168- 05-374 -3 16 8-05-325 16 8-05-460 168-05 -467 1016 1009 6 168- 05-375 4 5 6 168 -05-323 1020 1021 -0 168- 05-366 168- 05-365 168- 05-369 168- 05-370 -3 8 1 1010 1011 1014 1015 21 23 25 27 29 168-05-32 1 168-05 -432 TRACT A 111 168-05-142 1078 1079 104 168-05-4 33 BERYL 168-05-141 103 168-05-118 4 168-05-207 TRACT A Sales Comparison Approach - 65 168-05-140 102 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Sale #5 5335 E Shea Blvd Scottsdale Bella Terra (City Place @ Paradise Valley) Buyer Bella Terra at PV, LLC Monaco Development 142 E Ontario St Suite 525 Chicago IL 664-0800 County: Submarket: Map(Page): Legal: Maricopa Paradise Valley 105 - 170/LL Lot 1 Cityplace bk 372 pg 43 Intended Use: Frontage: Nursing home 0 Seller Income and Expenses Cityplace PV, LLC Invesco Real Estate 13155 Noel Rd Suite Gallerioa Twr Dallas TX 715-7400 Gross Scheduled Inc. Vacancy Per Unit 12.18% Ste Property Tax Other Exp. Vital Data $144,344 $819,929 Total Exp. Sale Price: $44,500,000 Doctument: SWD Building SF: 233,060 GIM: Price/SF: Topography: Cap Rate: Down Pmnt: Pct Down: Doc No: No. Units Price/Unit: $190.94 Level n/a $0 0% 1425580 240 $185,417 Cap Rate: Recording Date: 09/27/2005 Escrow/Contract: Days on Market: Exchange: Conditions: Zoning: Frontage: Comp No: Property Type: n/a N/Av No Condo Conversion R-2, Phoenix n/a PXA-82143-10-0520 Apartment $2,935,551 $357,550 $2,578,001 $964,273 Net. Annual Income $1,613,728 15.16 3.63% Comments: Buyer plans to convert the property to condominiums. Amenities: Balcony, business center, club house, covered parking, gym, patio, pool, spa, washer and dryer, individual metered. Parcel Information Parcel Number: 168-05-210 SF Gross: SF Net: Price/SF Gross: Price/SF Net: Improv Ratio(%): 595,901 595,901 $74.68 $74.68 80 Lot Dimensions: Confirmed: Irregular Public records Prior Sale Docket 1144717 12/23/1999 Sales Price $21,475,000 Property Characteristics Yr Built 1993 SF 233,060 Units 1BR 2BR 3BR Number 96 106 38 Parking Garages Bldgs 19 353 of which 156 are covered None Parking Ratio Listing Broker CB Richard Ellis Tyler Stories Construction Condition 2 Frame/stuccoGood 1.47 Buyer Broker Buyer is broker - represented self Anderson Financing TD's Lender 1st Cole Taylor Bank Balance Title Co: LandAmerica American Title $45,000,000 Payment n/a Sales Comparison Approach - 66 $4,018 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Improved Sales Map Resume of Improved Sales Sale No. 1 2 3 4 5 Address Rancho Antigua 8787 E Mountain View Rd Scottsdale Rancho Mirado 3850 E Greenw ay Rd Phoenix Taos Condos (Paradise Pt. Apts.) 4704 E Paradise Village Pkw Phoenix yN Adventura (Scottsdale Cove)9450 E Becker Ln Scottsdale Bella Terra (City Place @ Paradise 5335 EValley) Shea Blvd Scottsdale SP Sale Date Feb-05 Nov-05 Jul-05 Jul-05 Sep-05 Yr. Built 1985 1988 1984 1991 1993 Feb-06 1986 Unadjusted Total Sales Units/ Price Beds $23,150,000 220 $7,590,000 66 $10,325,000 136 $36,450,000 316 $44,500,000 240 Mean Standard Deviation Coefficient of Variation 135 196 86 44.2% Total Im p SF 217,758 63,840 130,920 295,951 233,060 Price Per SF $106.31 $118.89 $78.86 $123.16 $190.94 Price Per Unit $105,227 $115,000 $75,919 $115,348 $185,417 85,386 188,306 81,539 43.3% $123.63 $37.03 30.0% 119,382 36,015 30.2% Mean44, Standard Deviation (Measure Of Dispersion Around The Mean)45, Coefficient of Variation46 44 45 46 The Dictionary of Real Estate Appraisal, 3rd ed., op. cit., p. 225. Mean: A measure of central tendency. The sum of the values of a set divided by the number of values. See also arithmetic mean; geometric average; median; mode; moving average; weighted average. Ibid., p. 346. Standard Deviation: In statistics, a measure of the extent of absolute dispersion, variability, or scatter in a frequency distribution; obtained by extracting the square root of the arithmetic mean of the squares of the deviations from the arithmetic mean of the frequency distribution. Ibid., p. 62. Coefficient of Variation: In statistics, the standard error of the estimate divided by the mean value of the dependent variable; a measure of the relative chance for error in a forecast or estimate of the dependent variable. See also coefficient of dispersion. Sales Comparison Approach - 67 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX VALUATION ANALYSIS The Direct Comparison Method -- in which the sales will be discussed in the traditionally comparative way with adjustments made accordingly -- will be performed on the above sales. DIRECT COMPARISON METHOD: Five multifamily sales, all occurring since February 2005, are referenced. All are located within the northeast Metro-Phoenix market. Accordingly, the appraisers believe that the accumulated sales data accurately reflect the present market and its interrelated economic forces. There were some disparities within the data in relation to the most likely common denominators, most applicable site unit measurement is price per unit. The differences can be attributed to: ~ ~ ~ ~ ~ Real estate reflects an imperfect market; Varying locations of the respective sales properties; Inconsistencies relative to excess land of the sale properties in relation to the subject; Zoning and other legal restrictions, Physical characteristics, age of the improvements and the condition of the improvements, and; ~ Quality of the tenants. On the basis of the sales, we define the most probable buyer-type for properties similar to the subject to be well capitalized investors and owner users with holding power. Investors typically utilize known transactions to form an opinion of the value of the property in which they are interested and adjust for differences. Simulating market action, considerations or adjustments for location, zoning, size and time variations are deemed necessary. Adjustment to the Comparable Sales: The indicated sale prices and resulting units of comparison are based on unadjusted sale prices not yet adjusted to a cash equivalent price. A cash equivalent price is one which represents a normal consideration for the property sold unaffected by special financing amounts, terms, services, fees, costs or credits incurred in the transaction. The sale prices will be adjusted to cash equivalency if affected by favorable or sub-market financing terms within the following analysis. The subsequent extraction of various units of comparison are then based on the cash equivalent price. As in the valuation of the subject site, we assume typical buyers of these properties to be prudent investors, hence these participants are considered to have significant knowledge of market. These investors utilize known transactions to Sales Comparison Approach - 68 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX form an opinion of the value of the property in which they are interested and they are cognizant of the ranges within which other market participants operate. Elements of comparison are the characteristics of properties and transactions that cause the prices paid for real estate to vary. The appraisers considered and compared all reasonable differences between the comparable properties and the subject property that would affect their values. Market evidence was tested to identify the variable elements to which property values are especially sensitive. Adjustments for differences are made to the price of each comparable property to make the comparables equal to the subject on the effective date of the value estimate. The amount of adjustment made for each element of comparison depends on the extent to which each comparable property differs from the subject property. There are ten basic elements of comparison that may be considered in the sales comparison analysis.47 1. Real property rights conveyed 2. Financing terms 3. Conditions of sale 4. Expenditures made immediately after purchase 5. Market conditions (time) 6. Location 7. Physical characteristics, e.g., size, construction quality, condition 8. Economic characteristics, e.g., expense ratios, lease provisions, management, tenant mix. 9. Use (zoning) 10. Non-realty components of value In most cases these ten elements of comparison cover all the significant factors to be considered, but on occasion additional elements may be relevant. Other possible elements of comparison include access to the property, governmental restrictions such as conservation or preservation easements, water and riparian rights, on-site environmental conditions, and off-site improvements required for the development of a vacant site. Often a basic element of comparison is broken down into subcategories that specifically address the property factor being analyzed. For example, physical characteristics may be broken down into subcategories for age, condition, size, etc. The sequence of adjustments applied to the comparables is determined by the market data and the appraisers' analysis of those data.48 The ten basic elements are not the only order in which quantitative adjustments may be made by the appraiser; however, they have developed as the traditional sequence of adjustments for comparables and are so presented in this analysis. The traditional 47 48 The Appraisal of Real Estate, 12th ed., op. cit., pp. 426-458. The Appraisal of Real Estate, 12th ed., op. cit., p. 422. Sales Comparison Approach - 69 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX sequence of adjustments for comparing each comparable to the subject was as follows:49 1. 2. 3. 4. 5. Property Rights Conveyed Financing terms Conditions of Sale Expenditures immediately after purchase Market Conditions These five adjustments are made in sequence with cumulative percentage adjustments. Other pertinent adjustments are then summed to the adjusted market condition (time) price to obtain the final adjusted sale price. These other adjustments included: location, size, zoning/density (if appropriate), physical characteristics, sales circumstances (if appropriate), and marketability/plottage (if appropriate). Following are those for which we believe adjustments for differences between the sale properties and the subject property should be made. Because of the restricted number of sales available for analysis and because of the numerous variables involved in the comparison process, paired sales analysis is impractical and illogical, thus the following adjustments are judgmental. 1. Real Property Rights Conveyed: A transaction price is always predicated on the real property interest conveyed. Many types of real estate, particularly income producing property, are sold subject to existing leases. The revenue generating potential of a property is often fixed or limited by the terms of existing leases. In the valuation process, adjustments must be made to reflect the difference between properties leased at market rent and those leased at rent either below or above market levels. The lengths of the remaining lease terms affect these adjustments. Market rent and the financing currently available are used to estimate the value of a fee simple estate. When a property is considered free and clear of all existing leases and loans, its value is normally based on the market rent that it can command and the financing that can be obtained for it. The transaction price of a property that is sold subject to existing leases reflects the contract rent that it will generate during the term of each lease and the market rent that will likely be achieved thereafter. In these situations, the real property interest that is sold or being appraised is the leased fee estate subject to the existing leases. No adjustments were deemed necessary as all comparables were conveyed on a Fee Simple basis subject to standard exceptions. 49 The Appraisal of Real Estate, 12th ed., op. cit., pp. 443. Sales Comparison Approach - 70 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX 2. Financing Terms (Cash Equivalency): The transaction price of one property may differ from that of an identical property due to different financing arrangements. For example, the purchaser of a comparable property may have assumed an existing mortgage at a favorable interest rate. In another case a developer or seller may have arranged a buydown, paying cash to the lender so that a mortgage with a below market interest rate could be offered. In both cases, the buyers probably paid higher prices for the properties to obtain below market financing. Below market rates might also be extended to individuals who have substantial bank accounts and are therefore especially creditworthy. Conversely, interest rates at above market levels often result in lower sale prices. Other non-market financing arrangements include installment sale contracts, in which the buyer pays periodic installments to the seller and obtains legal title only after the contract is fulfilled, and wraparound loans, which are superimposed on existing mortgages to preserve their lower interest rates. These loans offer below market overall or blended interest rates to borrowers (buyers), but they yield market or above market interest rates to lenders (sellers). A financing adjustment may or may not include an adjustment for conditions of sale. A condition of sale adjustment recognizes that some sales are transacted by parties under duress, who are at a disadvantage. A combined adjustment results when favorable financing is a function of the seller's need to sell the property wilsonly. Appraisers recognize that, in some situations, these factors are interdependent. In cash equivalency analysis, an appraiser investigates the sale prices of comparable properties that were sold with apparent non-market financing to determine whether adjustments to reflect typical market terms are warranted. First, sales with non-market financing are compared to other sales transacted with market financing to determine whether an adjustment for cash equivalency can be made. If the market evidence is insufficient to support an adjustment based on the comparable sales, but trend or linear regression analysis indicates a value variance attributable to the difference in terms, then numerical adjustments can be made. There are precise, mathematical calculations for analyzing cash equivalency, but the financing adjustments derived from these calculations must be rigorously tested against market evidence. More often than not, the cash discount indicated by the calculations is not fully recognized by buyers and sellers. The market evidence itself must support whatever adjustment is made. The definition of market value recognizes cash equivalent terms provided the calculation is based on market evidence. Furthermore, conditions of sale may reveal other non-economic interests on the part of buyers or sellers. Therefore, appraisers must use cash equivalency Sales Comparison Approach - 71 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX calculations with caution and remember that the final adjustment is always derived from the market. Analysis of the comparables indicated that all of the sales sold on an all cash basis or what has been considered as the equivalent of cash to the seller and, therefore, these sales required no special adjustments for financing or cash equivalency. 3. Conditions of Sale: Adjustments for conditions of sale usually reflect the motivations of the buyer and the seller. In many situations, the conditions of sale significantly affect transaction prices. For example, a developer may pay more than market value for lots needed in a site assemblage because of the anticipated incremental value, or plottage value, resulting from the greater utility of a larger site. A sale may be transacted at a below market price if the seller needs cash in a hurry. A financial, business, or family relationship between the parties to a sale may also affect the price of property. Interlocking corporate entities may record a sale at a non-market price to serve their business interest. One member of a family may sell a property to another at a reduced price, or a buyer may pay a higher price for a property because it was built by his ancestors. When non-market conditions for sale are detected in a transaction, the sale can be used as a comparable only with great care. The circumstances of the sale must be thoroughly researched before an adjustment is made, and the conditions must be adequately disclosed in the appraisal. No adjustment for conditions of sale was deemed necessary. 4. Expenditures Made Immediately After Purchase: A knowledgeable buyer considers expenditures that will have to be made upon purchase of a property, as these costs will typically affect the purchase price. Examples of such expenditures may include costs associated with demolition of obsolete improvements, potential zoning changes or remediation of environmental contamination. All of the comparable sales are improved parcels and were reported to be purchased without the potential of additional excess costs to be paid after the sale date. It is premature to anticipate that a potential purchaser of the comparables would discount the asking price for costs associated with remodeling. Therefore, no adjustments were deemed warranted to the comparable sales for "Expenditures Made Immediately After Purchase". 5. Market Conditions (Time): Comparable sales that occurred under different market conditions than those applicable to the subject on the effective date of the report estimate require adjustment for any differences that affect their values. A common adjustment for Sales Comparison Approach - 72 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX market conditions is made for differences occurring since the date of sale. Since the time of comparable sales were transacted, general values may have appreciated or depreciated due to inflation or deflation and investors' perceptions of market conditions may have changed. Changes in market conditions may also result from other factors such as changes in income tax laws, building moratoriums, and fluctuations in supply and demand. Sometimes several economic factors working in concert cause a change in market conditions. A recession tends to deflate all real estate prices, but different property types will be affected differently. A decline in demand may affect only one category of real estate. If the demand for a specific type of property falls during a period of inflation, appraisals made during that period may not provide a reliable indication of the value of a similar property in a different period unless appropriate adjustments are made. Sales of other types of real estate transacted during the same period may better reflect the market conditions for the specific property under consideration. In a depressed economy, recent sales are often difficult to find. Older sales may be discounted over a reasonable holding period, corresponding to the length of time estimated for the market segment to recover. Although the adjustment for market conditions is often referred to as a "time" adjustment, time is not the cause of the adjustment. Market conditions which shift over time create the need for an adjustment, not time itself. If market conditions have not changed, no adjustment is required even though considerable time may have elapsed. Appraisers must also recognize that the sale of a property may be negotiated months or even years before the sale or final disposition of the property. In this case an adjustment for changes in market conditions between the date the contract is signed and the effective date of value may be appropriate. Changes in market conditions are usually measured as a percentage of previous prices. There are two traditional methods of estimating this percentage change in due to market conditions. The first method is paired analysis. If the physical and economic characteristics of a property remain unchanged, analyzing two or more sales of the same property over a period of time will indicate the rate of price change. An appraiser should always attempt to examine several sets of sales to arrive at an appropriate adjustment. An adjustment supported by just one paired data set may be unreliable. Sales and resale of the same properties provide the best indication of the change in market conditions over time. If data on resale properties are unavailable, then the second method typically utilized is to survey knowledgeable market participants and estimate the potential impact as a percentage change in the previous price. Sales Comparison Approach - 73 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX This is judgmental and is heavily influenced by the appraisers' experience and knowledge of the local market. Adjustments for time of sale are typically considered if there is reason to believe that the prices of real estate are rising or falling over a particular time period. The comparables all occurred within the 12 months. An upward trend of about 15% per year is evident over the past year based upon a comparison of the data. The transactions have therefore been preliminary adjusted for the four elements of adjustment previously discussed as follows: SUMMARY OF CUMULATIVE PERCENTAGE ADJUSTMENTS Sale No. 1 2 3 4 5 Unadj. Price Address Per Unit Rancho Antigua $105,227 Rancho Mirado $115,000 Taos Condos (Paradise Pt. Apts.) $75,919 Adventura (Scottsdale Cove) $115,348 Bella Terra (City Place @ Paradise Valley) $185,417 Rights Adjust m ents 0.0% 0.0% 0.0% 0.0% 0.0% CE Adjust m ents 0.0% 0.0% 0.0% 0.0% 0.0% Conditions Adjust m ents 0.0% 0.0% 0.0% 0.0% 0.0% Tim e Adjust m ents 14.9% 3.2% 8.8% 8.8% 5.9% Cum Adjusted $/Per Unit $120,880 $118,690 $82,594 $125,489 $196,310 In addition to the aforementioned, we have considered locational, physical, economic, use and non-realty differences between the sale and the subject property. Typically, the remaining adjustments are estimated on a percentage basis. At times, a deviation from this norm is required for actual or estimated dollar expenses such as cost-to-cure items or rent loss contributed by a lease-up program, etc. Where such dollar adjustments are required, the appraisers are of the opinion that these two types of adjustments should be handled separately and not merged into a composite adjustment. 6. Location: An adjustment for location may be required when the locational characteristics of a comparable property are different from those of the subject property. Excessive locational differences may disqualify property from use as a comparable. Most comparable properties in the same neighborhood have similar locational characteristics, but variations may exist within a neighborhood. A property's location is analyzed in relation to the location of other properties. Although no location is inherently desirable or undesirable, an appraiser can conclude that the market recognizes that one location is better than, equal to, or worse than another. Adjustments for location have been considered in this analysis with reference to the two major categories of influence on the subject property. "Accessibility" or Sales Comparison Approach - 74 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX "Linkage" and "Neighborhood Environment" or "Synergism". These two influences are estimated separately then applied to the comparable sales on a net basis. 6A. Accessibility (Linkages): The specific location of a comparable property can influence its price. Further, the access and visibility from a major arterial or location within a specific area can have a positive impact upon that property's price. Arterial exposure is primarily important for ease of locating and accessing the property by the public. The subject property is located within a growing suburban area of metro-Phoenix. All of the comparable sales are considered to have similar accessibility with no adjustment made. 6B. Neighborhood Environment (Synergism): Analysis of a site's environment focuses on the interrelationships between the appraised site and neighboring properties. The effects of any hazards or nuisances caused by neighboring properties must be considered. A site's value is also influenced by nearby amenities and developments on adjoining sites such as parks, fine buildings, and compatible commercial buildings. The types of structures surrounding the property being appraised and the activities of those who use them can greatly influence site value. The immediate neighborhood has an impact on the type of tenants that can be attracted to a property, such as population trends and crime statistics of the neighborhood. Neighborhood influences are those factors impacting value which are not necessarily directly abutting the site but are located in the immediate vicinity. Factors considered consist of the predominate use in the area, the quality and upkeep of the area and the positive or negative transition occurring. No adjustments were necessary for synergism. 7. Physical Characteristics: If the physical characteristics of a comparable property and the subject property differ in many ways, each of these differences may require comparison and adjustment. Physical differences may include differences in: size, functional utility, corner influences, topography, availability of infrastructure, attractiveness, and amenities. On-site environmental conditions are also considered. The value added or lost by the presence or absence of a differing item in a comparable property does not usually equal the cost of installing or removing the item. Frequently, variations in the size or shape of a parcel will influence the price Sales Comparison Approach - 75 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX paid. The appraisers have analyzed the comparable sale/listing to the subject size for size, shape, corner influences, topography and infrastructure as follows: 7A. Building Age: The subject property is proposed and has a projected economic life of 50 to 55 years The comparable sales have been set forth by age and the adjustment for building applied at 1/2% per year of the difference in the age. 7B. Building Size: Typically larger buildings sell for a lower per unit package price than smaller buildings. The sales are compared to the subject in size and their variance is the determination of a final value adjustment. A downward adjustment was made to all of the sales due to for larger unit size. Project Unit Size Adjustment Sale No. 1 2 3 4 5 Address Rancho Antigua Rancho Mirado Taos Condos (Paradise Pt. Apts.) Adventura (Scottsdale Cove) Bella Terra (City Place @ Paradise Valley) SP Site Size 990 967 963 937 971 % Variance 56.5% 52.9% 52.2% 48.1% 53.5% Site Size Adj. -15.0% -15.0% -15.0% -15.0% -15.0% 632 7C. Building Amenities/Condition/Quality: The subject property and the comparable sales were deemed to be of similar in design and condition. Numbers 3 and 5 were adjusted for amenities, condition and quality. 8. Economic Characteristics: Economic characteristics include all the attributes of a property that affect its net operating income. This element of comparison is usually applied to income-producing properties. Characteristics that affect a property's net operating income including operating expenses, quality of management, tenant mix, rent concessions, lease terms, lease expiration dates, renewal options, and lease provisions such as expense recovery clauses are considered. Investigation of these characteristics is critical to proper analysis of the comparables and to the final value estimate. Sales Comparison Approach - 76 Other Size Adj. … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Specific economic conditions affecting the subject property and the comparable sales involve the level of occupancy. Lower occupied buildings generally sell for a lower unit price to allow for the deficit cash flow and the time necessary to lease the building to physical stabilization. Each of the comparables are related and compared to the subject in terms of physical stabilization and subsequently adjusted. No adjustments were made for economic characteristics. 9. Use: An appraiser must address any difference in the use or the highest and best use of a potential comparable and the subject property. The appraiser must recognize this difference and determine whether the sale is an appropriate comparable and whether an adjustment is required. In most cases, the buyer or his or her agent must confirm the ultimate use for which the comparable was purchased. The subject is zoned R-5, Multifamily residential, City of Scottsdale. This zoning classification allows for residential use. The sales are similarly zoned No adjustment needed for density. 9. Non-Realty Components of Value: Non-realty components of value include personalty, business concerns, or other items that do not constitute real property but are included in the sale price of either the comparable or the subject property. These components should be analyzed separately from the realty. In most cases the economic lives, associated investment risks, rate of return criteria, and collateral security for such non-realty components differ from those of the realty. Furniture, fixtures, and equipment in a hotel or restaurant are typical examples of personalty. In the appraisal of properties in which the business operation is essential to the use of the realty, the use of the non-realty component must be recognized, estimated, and reported. Properties such as hotels and timeshare condominiums which have high expense ratios attributable to the business operation typically include a significant business value component. There were no adjustments necessary for any items that would be considered a trade fixture that was included in any of the three sales. No FF&E or non-realty components have been considered in this valuation. Sales Comparison Approach - 77 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX SUMMARY OF ADJUSTMENTS Other Adjustm ents Sale No. 1 2 3 4 5 Unadj. $/Unit $105,227 $115,000 $75,919 $115,348 $185,417 Cum Adj. 14.9% 3.2% 8.8% 8.8% 5.9% $/Unit $120,880 $118,690 $82,594 $125,489 $196,310 Location 0.0% 0.0% 0.0% 0.0% 0.0% Physical -15.0% -15.0% 5.0% -15.0% -35.0% Econ. 0.0% 0.0% 0.0% 0.0% 0.0% Use/ Zoning 0.0% 0.0% 0.0% 0.0% 0.0% None Realty 0.0% 0.0% 0.0% 0.0% 0.0% Total Net Other Adjustm ents -15.0% -15.0% 5.0% -15.0% -35.0% Adjusted Price Unit-Bed $102,748 $100,886 $86,723 $106,666 $127,601 SP $119,382 $104,925 Unadjusted vs. Adjusted SP/Unit SP/SF $ 200 Thousands Avg 100 0 1 2 3 4 5 Means Sale Number Unadjusted $/Unit Adjusted $/Unit Indicated Value Per Unit On a per unit basis the adjusted sales ranged from $86,723 to $127,601 per unit with a mean of $104,925 per unit. Sale numbers 1, 2 and 4 are considered the most similar due to amenities and overall comparability and location. We have concluded to a middle range value with an estimate of $100,000 per unit made. Therefore: 135 units x $xxxxxx = $xxxxxxxxx Sales Comparison Approach - 78 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX INCOME APPROACH This approach deals with the estimating of property value by measuring the worth of a future income stream. All of the basic real estate appraisal principles are involved in some manner in the Income Approach. The principle of anticipation is very important and serves as the underlying premise. The procedure in the Income Approach is to estimate the present worth of value of future anticipated benefits that are derived from ownership of the real property. The reason ownership of property rights have a value in exchange is that the owner of these rights is entitled to the future benefits accruing from the real estate. Anticipated future benefits have a direct affect on value. The Income Approach is a valid technique of estimating value when the appraised property is an investment property that is purchased for the generation of income. Properties like the subject are typically purchased for their anticipated benefits in the form of annual cash throw-off and capital appreciation upon reversion after the investment holding period. The procedures involved in the Income Approach are a simulation of investor-purchaser behavior. The approach accounts for many thought processes and analysis an investor performs in the acquisition of real estate. Rather than use an individual's investment objectives, general market objectives for the typical purchaser are substituted so that the result is a Market Value or value in exchange. The process involved in this approach is twofold; (1) the various income and expense items are defined that results in the estimation of Net Operating Income, and (2) the Net Operating Income is then discounted into a value estimate by the income capitalization process. The basic capitalization formula is: Value is equal to the Net Operating Income divided by the Overall Capitalization Rate. The following pages will present the above items under two major headings, Income and Expense Estimate and the Income Capitalization Process. INCOME AND EXPENSE ESTIMATE This portion of the report concerns itself with the estimation of income and expenses directly related to the operation of the real property under typical management conditions. Income refers to monies or other benefits received from the use and/or sale of the subject, while operating expenses denote those items necessary to maintain the production of income to the property. Income Approach - 79 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX INCOME: This portion of the report seeks to derive the Effective Gross Income for the subject property. Operating History The subject's current rent roll is as follows: Income Approach - 80 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Income Approach - 81 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Potential Gross Income (Market Rents): The Potential Gross Income is the annual rent roll at current market rates that the subject property is able to produce, assuming 100% occupancy. The Potential Gross Income is largely determined by what other similar properties are currently being rented for in the open market. To estimate what the market rental for the subject is, a survey was undertaken of similar apartment projects. Of the rentals discovered, the ones presented on the following pages were deemed to be most comparable to the subject property due to age, proximity and unit sizes. Using the above rentals, the market rent for the subject is estimated below. Income Approach - 82 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Rental Sheets Income Approach - 83 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Income Approach - 84 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Income Approach - 85 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Income Approach - 86 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Rental Comparables Income Approach - 87 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Comparable Rental Map Rental Adjustments All of the rentals are located within the northeast Scottsdale market area. The rental adjustments are made as follows: Effective Date All of the rentals was obtained by personally inspection of each site and confirmed by contact with leasing agents. Type of Project/Stories The subject and all of the comparables are two-story or three-story, garden-style complexes. No adjustments appear necessary for this factor. Income Approach - 88 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Project Occupancy Within a five mile radius of the subject are 38 similar apartment projects built between 1980 and 1995. The average from the above is 4.72%. For the subject we have concluded to an occupancy rate of 95%. The subject is currently 99% occupied. Concessions The appraisers visited each project to ask about concessions with the following noted. Year Built The comparables were constructed between 1988 and 1995. No adjustment was need for the age of the comparable rentals. Income Approach - 89 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Square Feet Area For purposes of size adjustments the subjects gross square footage was compared with the reported square footage of the comparables. Our experience suggests that these numbers are reasonable comparable. We recognize that differences also occur for other factors, i.e.. amenities, location, in addition to size. We have adjusted the comparables for square footage at $0.30 per square foot with no adjustments made for differences less the 50 square feet. Number of Bedrooms/Bath/Rooms No adjustments were necessary for bedrooms/baths/rooms. Balconcy/Terrace Each of the subject's units will have balconies or patios. All rental comparables have a similar feature with no adjustment needed. Garages/Carports The subject has carport available for each tenant. There area no garages on the subject site. Equipment All rental comparables have similar equipment to the subject. Services The subject rents will include water, sewer and trash as do all of the comparables with no adjustment needed. Storage All rental comparables have either interior or exterior storage and are considered similar to the subject with no adjustments necessary Project Location All of the other comparables are considered to have a similar location with no adjustment necessary. Condition/Quality The subject was built in 1987 and was recently remodeled. All of the other comparables were built between 1988 and 1995. No adjustment was needed. Income Approach - 90 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Fireplaces Half of the units (all upstairs units) have fireplaces. All of the comparables offers fireplaces as on option with a premium of $15 per month typical. Other Income: Other income refers to the miscellaneous or service income over and above what was estimated in the Rent Roll estimate. Examples of such income are furniture income, pet charge, retained deposits, cleaning/damages, late/NSF fees. This income is added to the potential rent roll income. The subject includes the following sources of other income; 1) pet rent; 2) retained deposits/late fees; 3) vending and miscellaneous income; and 4) redecorating fees. For purposes of our analysis, the following sources of other income has been identified: Pet Rent: All of the comparable projects allow pets with a typical charge of $20 per month. For the subject we estimate a rent of $20 per month for pets with 25% of the units having pets for a project per unit average of $6.25 per unit per month. Retained deposits/late fees: Refundable security deposits range from $150 to $500 per unit. Based upon prior projects we expect 50% of the deposits to be retained ($125 average) and a 75% average turnover over a 12 month period (82 unit). This equals (82 x $125/110/12) $7.77 (rounded) per unit per month. An additional $1 per unit per month is added for late/NSF fees. Vending: Vending income is typically split with a vending company that owns and maintains the equipment. We have estimated an amount of $6.50 per month per units as reasonable. Laundry: All the units have washers and dryers. There in no laundry facility in this project. The comparables are similarly appointed. Redecorating Fee: Redecorating fees range from $100 to $200 per unit. Based upon prior projects we expect a 75% average turnover over a 12 month period (82 unit). This equals (82 x $150/110/12) $9.32 per unit per month. Income Approach - 91 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX We have concluded to other income as follows: Pet rent $6.25 Retained deposits/late fees $8.77 Vending $6.50 Laundry $0.00 Redecorating fee $9.32 Total other income $30.84 Reconciliation of Rents We have concluded to the following rents: 1BR/1BA Units Subject 1 2 3 4 5 6 Mean 669 722 670 688 707 725 758 712 Unadjusted Rent $765 $760 $1,083 $770 $655 $785 803 Unadj. Rent/SF $1.06 $1.13 $1.57 $1.09 $0.90 $1.04 $1.13 1BA/1BR SF Adjusted Rent $775 $749 $760 $1,002 $759 $638 $758 $778 Adj. Rent/SF $1.16 $1.04 $1.13 $1.46 $1.07 $0.88 $1.00 $1.10 $775 The adjusted rents on this one bedroom units ranged from $638 to $1,002 with a mean of $778 per unit. On a per square foot basis, the range is from $0.88 to $1.46 per square foot with a mean of $1.10. The projected market rent for the subject is $775 per month with a fireplace and $760 per month without a fireplace. This appears reasonable and within the range as shown above. 2BR/2BA Units Subject 1 2 3 4 5 5 Mean 903 1,055 935 1,022 1,022 1,005 1,046 1014 Unadjusted Rent $905 $855 $1,278 $1,020 $765 $925 $958 Unadj. Rent/SF $0.86 $0.91 $1.25 $1.00 $0.76 $0.88 $0.94 2BR/2BA SF Adjusted Rent $900 $860 $845 $1,168 $985 $735 $880 $912 Adj. Rent/SF $1.00 $0.82 $0.90 $1.14 $0.96 $0.73 $0.84 $0.90 The adjusted rents on this two bedroom unit ranged from $735 to $1,168 with a mean of $912 per unit. On a per square foot basis, the range is from $0.73 to $1.14 per square foot with a mean of $0.90. The projected market rent for the subject is $900 per month with a fireplace and $885 per month without a fireplace. This appears reasonable and within the range as shown. Income Approach - 92 $900 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Market Adjusted Income C. Estim ate of Incom e 27. No. of Each Rentable Living Family Type Units Area (SF) 33 33 22 22 1/1 1/1 2/2 2/2 669 903 903 903 Composition of Units 1BR/1BA/LR/KIT/DA 2BR/2BA/LR/KIT/DA/FP 2BR/2BA/LR/KIT/DA 2BR/2BA/LR/KIT/DA/FP Unit Rent Total Mo. Rent Per Month For Unit Type $760 $775 $885 $900 $25,080 $25,575 $19,470 $19,800 $89,925 28. Total Estim ated Rentals for All Fam ily Units 29. No. Parking Spaces - Offstreet Parking and Other Non-Commercial Ancillary Income (Non Included in Rent) Attended Self Park Open Spaces @ Covered Spaces @ 216 Laundry Other units @ 110 vending 216 Other Total Spaces $0.00 $0.00 units @ per month per month per month $30.84 $0.00 per month per month $0 $0 $0 $3,392 $0 $3,392 Total Monthly Ancillary Income 30. Commercial (attach doct) Area-Ground Level 0 SF @ Other Levels 0 SF @ 0 0 per SF/month per SF/month 31. Total Estimate Gross Income at 100% Occupancy 32. Total Annual Rent (Item 31 x 12 months) $0.00 Total Monthly $0.00 Com m ercial Incom e $0 $93,317 $1,119,809 Expense Comparables No. 1 - Monterery Point This is a 244 unit garden style two and three-story project located at 510 S. Extension Road in Mesa. It was built in 1987 and is in good condition. The project consists of 1 and 2 bedroom units. Project amenities include swimming pool, spa and clubhouse. Unit amenities include washer/dryer, a/c, ceiling fans, refrigerators, balcony/patios, fireplaces and storage. Water, sewer and trash are included in the rents. No. 2 - Lakeside Village This is a 230 unit garden style two-story project located at 855 N. Dobson Road in Mesa. It was built in 1987 and is in good condition. The project consists of 1 and 2 bedroom units. Project amenities include swimming pool, spa, tennis courts, laundry room, play area and clubhouse. Unit amenities include a/c, ceiling fans, refrigerators, balcony/patios and storage. Water, sewer and trash are included in the rents. No. 3 - Mesa Park Apartments This is a 140 unit garden style two-story project located at 604 W. 8th Avenue in Mesa. It was built in 1999 and is in good condition. The project consists of 2 and Income Approach - 93 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX 3 bedroom units. Project amenities include swimming pool, spa and clubhouse. Unit amenities include washer/dryer hookups, a/c, ceiling fans, refrigerators, balcony/patios and storage. Water, sewer and trash are included in the rents. No. 4 - Cordillera Apartments This is a 272 unit garden style two-story project located at 17017 N. 12th Street in Phoenix. It was built in 1996 and is in good condition. The project consists of 1, 2 and 3 bedroom units. Project amenities include swimming pool, spa, racquetball and clubhouse. Unit amenities include a/c, ceiling fans, refrigerators, washer/dryers, balcony/patios and storage. Water, sewer and trash are included in the rents. Expenses: This involves an estimate and itemization of the expenses necessary in maintaining the generation of income of the subject property. The major categories of expenses are: administrative, operating, maintenance, replacement reserve and taxes. We will, in this section, discuss the individual elements within the above categories. Administrative: The first categories of expenses to be considered are management and other administrative expenses. 1. Advertising/Promotions This category includes a lease hostess, print/radio/TV, and printing supplies. The updated expense comparables range from $100 to $149 per unit. Advertising costs are likely to remain on the modest due to strong demand and a shrinking supply due to the condo conversion occurring in the market. We have made an estimate for the subject of $100 per unit per year. 2. Management Management is estimated at a percentage of the Effective Gross Income (EGI). This expense category is required to account for the time and effort required to manage an apartment complex. It is necessary to consider this expense even when the property is managed by the owner. Conversations with various management companies involved in the apartment market indicate a professional management expense of 3.5% to 5% of the EGI is reasonable, especially when payroll for on-site employees and other administrative expenses are excluded. Professional management encompasses the management of the real estate and not investment management. Income Approach - 94 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX The expenses comparables indicated a per unit management expense of $279 to $452 per unit. The comparables have between 140 and 272 units and the management expenses are typically expected to be higher on a per unit basis due to the economics of scale. For purposes of our analysis, we estimated an amount of 4% of the projected EGI ($1,063,818) or $42,553. This equates to approximately $387 per unit. 3. Other Administrative Cost This figure represents other administrative costs, except payroll, including; any leasing rental or renewal fees paid beyond the management fee; any alteration supervisory charges paid by the owner; legal and auditing fees; dues in professional organizations; architectural or professional engineer's fees; and all telephone and building office expenses and supplies paid by the owner. This is listed under several headings in the financial statement; salaries, maintenance, and general administration expense. The updated expense comparables range from $95 to $109 per unit. For purposes of our analysis, an estimate in the amount of $100 per unit per year is utilized. Operating: This category includes electricity, water and sewer expenses, and building services. 5. Elevator No elevator expense is necessary for this project. 6. Fuel (Heating and Domestic Hot Water) This includes all non-electrical fuel expenses for heating and domestic hot water. The subject is individually metered with the tenant responsible for all utilities except cold water, sewer and trash removal. In addition, this category included utility expenses for swimming pools, clubhouse and the office/maintenance area. For purposes of our analysis, we included this expense within item 7 and 9, below. 7. Lighting and Misc. Power This includes utilities for all purposes, including units, common maintenance areas, water and other related purposes. This figure includes 100% of the utility expenses. The subject is individually metered with the tenant responsible for all utilities including electricity, cable, water, sewer and trash. For purposes of this analysis, we included all electricity expenses within this category. The updated expense comparables range is from $107 to $192 per unit Income Approach - 95 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX per year. We estimate an amount for the subject of $175 per unit per year for electrical usage. 8. Water (and sewerage) The owner pays for the water and sewer services for the individual units and the owner is also responsible for the common area. The comparables were adjusted to exclude water, sewer and trash. The adjusted expense comparable estimates range from $51 to $182 per unit with an average of $150 per unit. For the subject property, we estimate an amount of $150 per unit per year. 9. Gas Natural gas is not used in this case. 10. Garbage and Trash Removal Garbage and trash removal will be provided by private carrier. The expense comparables range from $40 to $63 per unit. We believe that an amount of $50 per unit per year is considered reasonable. 11. Payroll This category includes on-site management personal and maintenance personnel. The updated expense comparables indicate a range from $648 to $806 per unit. There are no free rent units for management at any of the comparables. For our analysis, an estimated amount of $700 per unit appears reasonable. This includes payroll taxes estimated at $80 per unit per year, which is deducted from the line 11 and included in line 25 for purposes of this analysis. Thus the adjusted payroll amount equals $620 per unit per year. 12. Other Operating Expenses This is a category for miscellaneous operating expenses. This included minor items not addressed above. The updated comparables indicate a range of from $0 to $50 per unit. For the subject we have used an estimate of $50 per unit. Maintenance: 14. Decorating (Interior Only) Included on this line are all materials and supplies used in the decorating of the interior of the buildings. Paint, wallpaper, brushes, wall-washing, and similar items belong in this category. Replacement of floor coverings, draperies, furnishings or light fixtures (if not a capital expenditure) also belong in this category. Exterior painting should be included in maintenance and repairs. Income Approach - 96 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX The updated comparables indicate a range between $55 to $174 per unit. Newer units tend to be in better condition with decorating typically needed as units turnover. We estimate an amount of $150 per unit per year. 15. Repairs The repair expenses category accounts for all items of general maintenance and repairs, both interior and exterior. This includes exterior painting or cleaning; boiler inspection and repair contracts; air-conditioning service contracts; parts, small hand tools; fire protection service and equipment; plumbing, electrical, plastering, masonry, carpentry, heating, roofing service unless bills properly constitute a capital expenditure. The updated expense comparables range from $84 to $222 per unit. New units tend to require less repairs and maintenance. We estimate the annual amount in this category at $150 per unit per year, because the subject is new. 16. Extermination The comparables range from $13 to $36 per unit. For our analysis, we will use an estimate of $35 per unit. 17. Insurance Insurance agencies were consulted for current quotes on coverage costs. Typical insurance coverage carried by owners include all insurance expenses, i.e., fire, comprehensive, liability, flood coverage, etc. Insurance premiums are based on location, size of the complex, type and quality of construction, and distance relative to fire protection. The expense comparables range from $108 to $160 per unit. Current insurance quotes were also considered. An amount of $150 per unit per year was used given the subject slightly smaller unit size. 18. Ground Expense This category represents gardening, landscaping, sidewalks and street sweeping, and outside maintenance, including ground maintenance supplies, but excluding wages. The expense comparable estimates range from $130 to $175 per unit. For our analysis, the amount of $150 per unit is reasonable. 19. Other A category for other operating expenses covers miscellaneous items not included elsewhere in this analysis. This is a generally vague category and can vary, as evidenced by the updated expense comparable, with a range of from $25 to $227 noted. For purposes of our analysis, we estimate an amount of $25 per month. Income Approach - 97 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX 20. Trend Adjustment The comparables were adjusted upward for time within this analysis based upon IREM market analysis at a rate of 3% (typical range from 2% to 4%). From our research files, we have analyzed 95 Class A Apartment sales over the past 10. From our analysis, the average increase in expenses was 3.12%. This adjustment is made geometrically with a total adjustment of factor 1.03 x 1.03 x 1.03 1.093. Rather than make a lump sum adjustment, we have trended each expense line item individually. 21. Reserves for Replacement and Retrofit A replacement reserve fund is a necessary expense item for income producing property. Reserve for replacement is an annual allowance subtracted from the income that provides for future replacement of components that will wear out sooner than the bone structure. This annual reserve is necessary in that the projected income would decrease if the worn-out item was not replaced; the most probable user would not pay market rent for a deficient building. This is not a part of the Institute of Real Estate Manager's operating costs outline. The fund indexed to the physical components provides for the timely replacement of short-lived items. Apartment projects can have the reserve and retrofit fund indexed to the number of units. We estimate the reserve amount to be based upon 0.006% of the total hard cost estimate. For purposes of our analysis we have estimated and amount equal to $350 per unit. Taxes: 23. Real Estate Taxes Real estate taxes are generally considered a fixed expense in that they typically do not change with the level of occupancy. They are more likely to change as a result of area-wide property appreciation/depreciation or with the fiscal requirements of local municipal and county governments. The real estate taxes are based upon current estimated and are thus not trended. Income Approach - 98 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Real Estate Taxes The Expense comparables real estate taxes fall in a range from $408 to $628 per unit and from $0.45 to $0.65 per square foot of gross area. The subject is currently taxed at $404 per unit and $0.52 per square foot. We estimate the real estate taxes to be $425 per unit, which equals $46,750 or $0.52 per gross square foot. 24. Personal Property Tax No personal property taxes are included within this analysis. A minimal amount of personal property might be taxes on such items as office furnishing. An allowance has been made in the Other Administrative category to cover this expense. 25. Employees Payroll Tax In addition to salary expenses, payroll taxes must also be paid. We have included an amount of $80 per unit for this category. 26 & 27. Other Taxes No other taxes are expected or included herein. 29. Total Expenses All expenses necessary in sustaining the income generation of the subject property have been considered. These expenses include fixed, operating and reserves for replacement. Expenses for capital improvements, principle and interest payments on borrowed funds, income taxes, etc., are not considered expenses to the real estate and were not deducted. Total expenses are estimated at $368,285 per year, or $3,348 per unit per year. The estimated expenses are in line with other apartment buildings as noted below. Income Approach - 99 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX NET OPERATING INCOME: The next step in the Income Approach is the mathematical derivation of the Net Operating Income. Estimated expenses are subtracted from the Effective Gross Income. It is this income that is used in the capitalization formula. The Net Operating Income represents the return on and the recapture of the improvement investment and a return on the land investment. Reconstructed Operating Statement Income Approach - 100 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Capitalization of Net Operating Income: This is a procedure in appraisal analysis where anticipated economic benefits to be derived from a property are converted into a value estimate through a capitalization process. Two methods can be used to process the subject's income stream. These methods are Direct Capitalization and Yield Capitalization. Direct Capitalization of the Net Operating Income: Direct capitalization is simple and thus easily understood. It does not specify a distinction between return on and return of capital, nor does it explain value in terms of specific assumptions made by lenders. Various techniques, dependent upon the quantity and quality of data, are available. These include: 1. Derivation from comparable sales. 2. Derivation from effective gross income multipliers. 3. Band of Investment--mortgage and equity components. 4. Band of Investment--land and building components. 5. Debt coverage formula. Direct capitalization is the process by which the net operating income is converted into value. Specifically, direct capitalization is defined as the method used to convert an estimate of a single year's income expectancy into an indication of value in one step, either by dividing the income estimate by an appropriate rate or multiplying the potential income estimate by an appropriate factor. The rate reflects the relation between the income and value and is derived from market data. Gross Income Multiplier Method: The GIM or Gross Income Multiplier Method is an economic characteristic of the proper property analysis. Typically, the economic characteristics of the comparable sales in the Sales Comparison Approach are market extracted Gross Income Multipliers (GIM). This multiplier is extracted from the comparable sales by dividing the property's sale price by the Potential Gross Income, much like a times earning ratio of a business enterprise. The GIM Method is best applied to properties with similar cash flows and similar levels of physical and economic stabilization. The GIM was adjusted downward slightly for locational differences. The following GIM grid summaries the analysts' findings. Income Approach - 101 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Gross Income Multiplier Analysis Derivation from Comparable Sales: The second economic method analyzed was the Direct Capitalization Method. The overall rate is extracted from the comparable sales by dividing the properties' sale price by the Net Operating Income. The Overall rate was adjusted upward slightly for locational differences. The following Direct Capitalization Analysis summarizes the analysis findings. Direct Capitalization Income Approach - 102 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Conclusion to Income Approach Three methods were applied in the valuation of the subject property in order to derive an estimate of value as follows: Gross Income Multiplier Method: Derivation from the Comparable Sales Method: $xx,xxx,xxx $xx,xxx,xxx The GIM, OAR and Band of Investment Methods are considered significant and reasonable accurate methods because the comparison analysis is straightforward and the adjustments made were considered typical of market reactions. Therefore, we are of the opinion the Market Value of the As Is Leased Fee Interest of the subject property, as of March x, 2006, (with an inspection date of March x, 2006) via the Income Approach is: $xx,xxx,xxx. Income Approach - 103 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX RECONCILIATION AND FINAL VALUE ESTIMATE Final reconciliation is: The application of the process of evaluating alternative conclusions, and selecting from the indications of value derived from each of the approaches utilized in the appraisal problem, to arrive at a final estimate of value. The appraiser weighs the relative significance, applicability and defensibility of the indications of value derived from each approach and places the most weight and reliance on the one that, in his professional judgment, best approximates the value defined. He reconciles the facts, trends and observations developed in the analysis and reviews his conclusions and the probable validity and reliability of those conclusions.50 The Cost and Sales Comparison Approaches are, characteristically, expressions of the value of fee simple interests. The Income Approach may or may not express a value indication of the fee simple interest dependent upon the leasing status of the property. Because the leases are short term in nature, no difference between the Market Value of the As Is Leased Fee and Fee Simple Interest is made. This a Complete Appraisal - Summary Appraisal Report. Please refer to the Underlying Assumptions on pages 2 through 11. A summary of the value indicators follows: Sales Comparison Approach: Per unit method:. . . . . . . . . . . . . . . . . . . . . . . . . . $xx,xxx,xxx Income Approach: Gross Income Multiplier Method:. . . . . . . . . . . . . $xx,xxx,xxx Derivation from the Comparable Sales Method:. . $xx,xxx,xxx Usually, depending upon the type of property appraised or the purpose of the appraisal, one approach may carry more weight or be considered more reliable for a final value estimate. In other instances, because of the inadequacy or unavailability of data, one or even two approaches may be accorded little weight in the final value estimate. The subject is a 20 year older apartment complex. The Cost Approach offers little support given the subjects age and was thus excluded from this analysis. The value suggested by the Income Approach attempts to consider the investment characteristics of the property and the risks inherent in this type of investment. This approach is considered to have relatively good data, to the extent that the estimates of income and expenses for the subject reflect the actual market. 50 Boyce, p. 103. Reconciliation and Final Value Estimate- 104 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX The Sales Comparison Approach offers reasonable support and justification of current market conditions. In the subject's case, the price per unit indicator was used as the unit measurement of value. Most of the recent sales activity of apartments in the immediate area are for projects planning to be converted to condominiums. While these represent a change in use from a rental project to a sales project, they also represent the current resale market in the area. While this represents an alternative use for the subject, it also means that the inventory of apartments in the area is decreasing and will likely result in an increased demand for rental units. This approach was given a considerable weight. Within this Complete Appraisal - Summary Appraisal Report with the Sales Comparison and Income Approach used. Both have good current market data from which analysis and comparisons were made and both offer strong supportable conclusions. Therefore, it is our opinion, based upon the preceding data and discussion, the Market Value of the As Is Leased Fee Interest of the subject property, as of March x, 2006 (with an inspection date of March x, 2006), was: Market Value of the As Is Leased Fee Interest of the subject property Xxx Million Dollars $xx,xxx,xxx Reconciliation and Final Value Estimate- 105 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX CERTIFICATION USPAP Certification As a result of a request for a Complete Appraisal - Summary Appraisal Report assignment of the property, legally described in the body of the report, we certify51 to the best of our knowledge and belief: 1. The statements of fact contained in this report are true and correct [S.R. 2-3, USPAP]. 2. The reported analyses, opinions, and conclusions are limited only by the reported assumptions and limiting conditions, and are our personal, impartial, and unbiased professional analyses, opinions, and conclusions [S.R. 2-3, USPAP]. 3. I (we) have no present or prospective interest in the property that is the subject of this report, and we have no personal interest with respect to the parties involved [S.R. 2-3, USPAP]. 4. I have no bias with respect to the property that is the subject of this report or to the parties involved with this assignment [S.R. 2-3, USPAP]. 5. My engagement in this assignment was not contingent upon developing or reporting predetermined results [S.R. 2-3, USPAP]. 6. My (our) compensation for completing this assignment is not contingent upon reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal [S.R. 2-3, USPAP]. 7. My (our) analyses, opinions, and conclusions were developed, and this report has been prepared, in conformity with the Uniform Standards of Professional Appraisal Practice (USPAP) published and copyrighted by the Appraisal Foundation and the Arizona Appraisal Board and the standards and reporting requirements of the Code of Professional Ethics and the Standards of Professional Practice of the Appraisal Institute [S.R. 2-3, USPAP]. 8. Larry D. Schnepf has made a personal inspection of the property that is the subject of this report [S.R. 2-3, USPAP]. 9. No other persons than those listed herein provided significant professional assistance to the persons signing this report. [S.R. 2-3, USPAP]. 10.The use of this report is subject to the requirements of the Arizona Appraisal Board relating to review by its duly authorized representatives. 11. Larry Schnepf is currently certified under the State of Arizona's Appraisal Board mandatory appraiser licensing and continuing education program. [A.R.S. Section 32-3601]. 12.The appraisers have reviewed the Competency Provision of the USPAP and are in full compliance with this provision [Competency Provisions - USPAP]. 13.We certify that, to the best of our knowledge and belief, the reported analyses, opinions and conclusions were developed, and this report has been prepared, in 51 Uniform Standards of Professional Appraisal Practice (USPAP) 2005. Certification -106 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX conformity with the requirements of the Code of Professional Ethics and the Standards of Professional Appraisal Practice of the Appraisal Institute. 14.We certify that the use of this report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. 15.The undersigned hereby acknowledges that he/she/they has/have the appropriate education and experience to complete the assignment in a competent manner. The reader is referred to the appraisers' Statement of Qualifications. Further, the value reported is based upon cash in U.S. dollars or in terms of similar financial arrangements. The value(s) reported are intended to conform with Code of Ethics and Standards of Professional Practice of the Appraisal Institute; the Uniform Standards of Professional Appraisal Practice (USPAP) as promulgated by the Appraisal Standards Board of the Appraisal Foundation and the Appraisal Institute and regulatory guidelines as published by various federal agencies, including OCC's Rule/Policy 12 CFR Part 34 pertaining to federally chartered banks. Respectfully submitted, Schnepf Ellsworth Appraisal Group Larry D. Schnepf, MAI, SRPA Certified Arizona General Real Estate Appraiser Certificate # 30284 Certification -107 … © SCHNEPF ELLSWORTH APPRAISAL GROUP ˆ 10680XX Addenda ƒOwnership/Legal Description ƒEngagement Letter ƒQualifications Addenda
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