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Home My WebLink Aboutexhibits 3J.B. ALHALE & ASSOCIATES, INC. REAL ESTATE APPRAISERS AND CONSULTANTS 3121 COMMODORE PLAZA, SUITE 200 COCONUT GROVE, FLORIDA 33133-5846 JOZEF ALHALE, MAI STATE CERTIFIED GENERAL APPRAISER NO. RZ0001557 July 17, 2001 Ms. Laura Bilberry Director Office of Asset Management City of Miami 444 S.W. 2nd Avenue Miami, Florida 33130 Re: Job No: A2122 RFQ No: 99-00-271 Property 1 (MHZ-40) - Property 2 (MHZ-190) - Property 3 (MHZ-192) - Property 4 (MHZ-199) - Property 5 (MHZ-200) - Property 6 (MHZ-45) - Property 7 (MHZ-58) - Property 8 (MHZ-749) - Property 9 (MHZ-209) - Property 10 (MHZ-9) - Property 11 (MHZ-750) - TEL: (786) 552-0960 FAX: (786) 552-0970 , jbalhale@aol.com 1250 N.W. 62nd Street, Miami, Florida 1251 N.W. 59th Street, Miami, Florida 1275 N.W. 59th Street, Miami, Florida 1260 N.W. 59th Street, Miami, Florida 1254 N.W. 59th Street, Miami, Florida 1231 N.W. 61st Street, Miami, Florida 1202 N.W. 61st Street, Miami, Florida 1613 N.W. 54th Street, Miami, Florida • 1241 N.W. 58th Terrace, Miami, Florida 1492 N.W. 62nd Street, Miami, Florida 1625 N.W. 54th Street, Miami, Florida Dear Ms. Billberry: Pursuant to your request for an appraisal of the above referenced properties, I submit this narrative appraisal report. Legal Description: Property 1 - Lots 13 through 16, less the northern ten feet for right-of-way, Block 2, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 2 - Lot 23, Block 6, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida I Ms. Laura Billberry ' ` July 17, 2001 Page Two Property 3 - Lot 26, Block 6, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 4 - Lot 5, Block 7, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 5 - Lot 6, Block 7, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 6 - Lots 31 and 32, Block 2, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 7 - Lots 11 and 12, Block 3, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 8 - Lot 16, less the southern ten feet for street, Block 36, Floral Park First Amendment, as recorded in Plat Book 8, Page 5 of the Public Records of Miami -Dade County, Florida Property 9 - Lot 23, Block 7, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 10 - Portion of Lots 1 and 2, Block 10, described as beginning at the southeast corner of Lot 2, northerly for 98.71 feet, westerly for 17.20 feet, southwesterly for 34.27 feet, southerly for 79.07 feet to the point of beginning, Orange Heights, as recorded in Plat Book 14, Page 62 of the Public Records of Miami -Dade County, Florida Property 11 - Lot 15, less the southern five feet for street, Block 36, Floral Park First Amendment, as recorded in Plat Book 8, Page 5 of the Public Records of Miami -Dade County, Florida I have made a physical inspection of the subject properties, reviewed the income and expense data, and performed market research to provide estimates of the Highest and Best Use, and the Market Value of the Fee Simple Interest in the subject properties in their current "as is" condition, as of June 22, 2001. It is my estimate that the Market Value of the Fee Simple Interest in the subject properties in their current "as is" condition, as of June 22, 2001, was: PROPERTY ONE - 1250 N.W. 62ND STREET (MHZ-40) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION THREE HUNDRED EIGHTY THOUSAND DOLLARS ($380,000) J.B. ALHALE & ASSOCIATES, INC. REAL ESTATE APPRAISERS AND CONSULTANTS Ms. Laura Billberry July 17, 2001 Page Three PROPERTY TWO - 1251 N.W. 59TH STREET (MHZ-190) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED TWENTY ONE THOUSAND DOLLARS ($121,000) PROPERTY THREE - 1275 N.W. 59TH •STEET (MHZ-192) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED TWENTY ONE THOUSAND DOLLARS ($121,000) PROPERTY FOUR - 1260 N.W. 59TH STREET (MHZ-199) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED TWENTY ONE THOUSAND DOLLARS ($121,000) PROPERTY FIVE - 1254 N.W. 59TH STREET (MHZ-200) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED TWENTY ONE THOUSAND DOLLARS ($121,000) PROPERTY SIX - 1231 N.W. GIST STREET (MHZ-45) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION THREE HUNDRED FORTY THOUSAND DOLLARS ($340,000) PROPERTY SEVEN - 1202 N.W. 61ST STREET (MHZ-58) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED TEN THOUSAND DOLLARS ($110,000) PROPERTY EIGHT - 1613 N.W. S4TH STREET (MHZ-749) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED FORTY FOUR THOUSAND TWO HUNDRED FIFTY DOLLARS ($144,250) PROPERTY NINE - 1241 N.W. S8TH TERRACE (MHZ-209) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION NINE THOUSAND FIVE HUNDRED DOLLARS ($9,500) J.B. ALHALE 8r ASSOCIATES, INC. REAL ESTATE APPRAISERS AND CONSULTANTS Ms. Laura Bilberry July 17, 2001 Page Four PROPERTY TEN -1492 N.W. 62ND STREET (MHZ-A) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION FOURTEEN THOUSAND DOLLARS ($14,000) PROPERTY ELEVEN - 1625 N.W. 54TH STREET (MHZ-750) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION TEN THOUSAND THREE HUNDRED DOLLARS ($10,300) Sincerely, Jozef Albale, MAI State Certified General Appraiser License No. RZ 0001557 wl-05-09 ).B. ALHALE 8t ASSOCIATES, INC. REAL ESTATE APPRAISERS AND CONSULTANTS r TABLE QJ CONTENTS PAGE NO, SUMMARY OF SALIENT FACTS AND CONCLUSIONS 1-8 PHOTOGRAPHS OF SUBJECT PROPERTY 9-19 PURPOSE/FUNCTION OF THE APPRAISAL 20 SCOPE OF THE APPRAISAL 20 PROPERTY RIGHTS APPRAISED 20 DATE OF VALUATION 20 STATEMENT OF OWNERSHIP AND HISTORY 21 ESTIMATED MARKETING PERIOD 21 DEFINITION OF MARKET VALUE 22-23 NEIGHBORHOOD ANALYSIS 23 DESCRIPTION OF THE SITES 23 UTILITIES 23 FLOOD ZONE 24 ZONING 24-25 ASSESSMENT AND REAL ESTATE TAXES 26 MULTI -FAMILY RESIDENTIAL MARKET OVERVIEW 27-32 THE VALUATION PROCESS 33 THE INCOME CAPITALIZATION APPROACH 34-54 THE SALES COMPARISON APPROACH 55-84 THE SALES COMPARISON APPROACH (LAND VALUATION) 85-99 THE COST APPROACH 100-101 RECONCILIATION AND FINAL VALUE ESTIMATE 102-104 CONTINGENT AND LIMITING CONDITIONS 105-106 CERTIFICATION 107 ADDENDA 108 LETTER OF ENGAGEMENT 109 ZONING ORDINANCE 110-111 CONTINUING APPRAISAL EDUCATION (Jozef Alhale, MAI) 112 QUALIFICATIONS (Jozef Alhale, MAI) 113 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 SUMMARY OF SALIENT FACTS AND CONCLUSIONS Location: Address; Property 1 - Property 2 - Property 3 - Property 4 - Property 5 - Property 6 - Property 7 - Property 8 - Property 9 - Property 10 - Property 11 - Property 1 - 223 feet west of the southwest corner of N.W. 62nd Street and N.W. 12th Avenue, Miami, Florida Property 2 - 250 feet east of the northeast corner N.W. 59th Street and N.W. 13th Avenue, Miami, Florida Property 3 - 100 feet east of the northeast corner of N.W. 59th Street and N.W. 13th Avenue, Miami, Florida Property 4 - 200 feet east of the southeast corner of N.W. 59th Street and N.W. 13th Avenue, Miami, Florida Property 5 - 250 feet east of the southeast corner of N.W. 59th Street and N.W. 13th Avenue, Miami, Florida Property 6 - 223 feet west of the northwest corner of N.W. 61st Street and N.W. 12th Avenue, Miami, Florida Property 7 - Southwest corner of N.W. 61st Street and N.W. 12th Avenue, Miami, Florida Property 8 - 140 feet east of the northeast corner of N.W. 54th Street and N.W. 17th Avenue, Miami, Florida Property 9 - 250 feet east of the northeast corner of N.W. 58th Terrace and N.W. 13th Avenue, Miami, Florida Property 10 - 11.3 feet south of the southeast corner of N.W. 62nd Street and N.W. 15th Avenue, Miami, Florida Property 11 - 90 feet east of the northeast corner of N.W. 54th Street and N.W. 17th Avenue, Miami, Florida 1250 N. W. 62nd Street, Miami, Florida 1251 N.W. 59th Street, Miami, Florida 1275 N.W. 59th Street, Miami, Florida 1260 N.W. 59th Street,, Miami, Florida 1254 N.W. 59th Street, Miami, Florida 1231 N.W. 61st Street, Miami, Florida 1202 N.W. 61st Street, Miami, Florida 1613 N.W. 54th Street, Miami, Florida 1241 N.W. 58th Terrace, Miami, Florida 1492 N.W. 62nd Street, Miami, Florida 1625 N.W. 54th Street, Miami, Florida J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 312! Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 1 - SUMMARY OF SALIENT FACTS AND CONCLUSIONS Property Code: Property 1 - MHZ-40 Property 2 - MHZ-190 Property 3 - MHZ-192 Property 4 - MHZ-199 Property 5 - MHZ-200 Property 6 - MHZ-45 Property 7 - MHZ-58 Property 8 - MHZ-749 Property 9 - MHZ-209 Property 10 - MHZ-9 Property 11 - MHZ-750 Folio No: Property 1 - 01-3114-043-0290 Property 2 - 01-3114-043-1120 Property 3 - 01-3114-043-1140 Property 4 - 01-3114-043-1210 Property 5 - 01-3114-043-1220 Property 6 - 01-3114-043-0291 Property 7 - 01-3114-043-0530 Property 8 - 01-3122-052-6570 Property 9 - 01-3114-043-1310 Property 10 - 01-3114-035-1690 Property 11 - 01-3122-052-6560 Owner of Record: Property 1 - Property 2 - Property 3 - Property 4 - -- Continued Model City Investment Corporation 13899 Biscayne Boulevard Suite 310 Miami, Florida 33181 John H. Jr. and Gwendolyn Johnson 1251 N.W. 59th Street Miami, Florida 33142 John H. Jr. and Gwendolyn Johnson 1701 N.W. 187th Street Opa Locka, Florida 33056 John H. Jr. and Gwendolyn Johnson 1260 N.W. 59th Street Miami, Florida 33142 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 2 - -yam SUMMARY OF SALIENT FACTS AND CONCLUSIONS -- Continued — Owner of Record (Continued): Property 5 - John H. Jr. and Gwendolyn Johnson 1254 N.W. 59th Street Miami, Florida 33142 Property 6 - Model City Investment Corporation 13899 Biscayne Boulevard Suite 310 Miami, Florida 33181 Property 7 - Kimberly S. Termer 1202 N.W. 61st Street Miami, Florida 33142 Property 8 - Mack Barkley, Jr. 15770 N.W. 17th Court Miami, Florida 33054-2102 Property 9 - Word of Life Community Development Corporation 4646 N.W. 17th Avenue Miami, Florida 33142 Legal Description: Property 10 - Greenland Realtors, Inc. 6970 N.W. 17th Avenue Miami, Florida 33147 Property 11 - Mack Barkley, Jr. 15770 N.W. 17th Court Miami, Florida 33054-2102 Property 1 - Lots 13 through 16, less the northern ten feet for right-of-way, Block 2, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 2 - Lot 23, Block 6, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 3 - Lot 26, Block 6, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 3 - SUMMARY OF SALIENT FACTS AND CONCLUSIONS -- Continued — Legal Description (Continued): Property 4 - Lot 5, Block 7, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of • M ami-Dade County, Florida Property 5 - Lot 6, Block 7, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 6 - Lots 31 and 32, Block 2, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 7 - Lots 11 and 12, Block 3, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 8 - Lot 16, less the southern ten feet for street, Block 36, Floral Park First Amendment, as recorded in Plat Book 8, Page 5 of the Public Records of Miami -Dade County, Florida Property 9 - Lot 23, Block 7, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 10 - Portion of Lots 1 and 2, Block 10, described as beginning at the southeast comer of Lot 2, northerly for 98.71 feet, westerly for 17.20 feet, southwesterly for 34.27 feet, southerly for 79.07 feet to the point of beginning, Orange Heights, as recorded in Plat Book 14, Page 62 of the Public Records of Miami -Dade County, Florida Property 11 - Lot 15, less the southern five feet for street, Block 36, Floral Park First Amendment, as recorded in Plat Book 8, Page 5 of the Public Records of Miami -Dade County, Florida Site Area: Property 1 - Property 2 - Property 3 - Property 4 - Property 5 - Property 6 - Property 7 - 11,200 SF 5,300 SF 5,300 SF 5,300 SF 5,300 SF 10,600 SF 6,888 SF J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 4 - SUMMARY OF SALIENT FACTS AND CONCLUSIONS -- Continued -- Site Area (Continued): Property 8 - 6,000 SF Property 9 - 5,300 SF Property 10 - 4,950 SF Property 11 - 6,000 SF Description: Property One consists of a U-shaped three-story 27-unit CBS apartment building which was built in 1958, and contains an adjusted building area of 11,186 SF, as per the Public Records of Miami -Dade County, Florida. The building contains 'a Gross Building Area of 12,033 SF and the unit mix is comprised of twenty-four one bedroom -one bathroom and three two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units; security entrance and on -site parking for ten cars. The property appears to have undergone a moderate renovation program at a reported cost of $125,000, after its purchase in January 2000 with Property Six. The property appears to be adequately maintained, with no signs of notable deferred maintenance. ..r Property Two consists of a rectangular -shaped two-story 4-unit CBS apartment building which was built in 1965, and contains an adjusted building area of 2,779 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 2,890 SF and the unit mix is comprised of four two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units and on - site parking for four cars. The property appears to be adequately maintained, with no signs of notable deferred maintenance. Property Three consists of a rectangular -shaped two-story 4- unit CBS apartment building which was built in 1965, and contains an adjusted building area of 2,762 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 2,890 SF and the unit mix is comprised of four two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units and on - site parking for four cars. The property appears to be adequately maintained, with no signs of notable deferred maintenance. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 5 - SUMMARY OF SALIENT FACTS AND CONCLUSIONS -- Continued -- Description (Continued): Property Four consists of a rectangular -shaped two-story 4-unit CBS apartment building which was built in 1965, and contains an adjusted building area of 2,762 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 2,890 SF and the unit mix is comprised of four two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units and fenced on -site parking for four cars. The property appears to be adequately maintained, with no signs of notable deferred maintenance. Property Five consists of a rectangular -shaped two-story 4-unit CBS apartment building which was built in 1964, and contains an adjusted building area of 2,853 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 2,890 SF and the unit mix is comprised of four two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units and fenced on -site parking for four cars. The property appears to be adequately maintained, with no signs of notable deferred maintenance. Property Six consists of a U-shaped three-story 24-unit CBS apartment building which was built in 1959, and contains an adjusted building area of 10,308 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 9,543 SF and the unit mix is comprised of twenty-one one bedroom -one bathroom and three two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units; security entrance and on -site parking for ten cars. The property appears to have undergone a moderate renovation program at a reported cost of $125,000, after its purchase in January 2000 with Property One. The property appears to be adequately maintained, with no signs of notable deferred maintenance. Property Seven consists of a rectangular -shaped two-story 4- unit CBS apartment building which was built in 1979, and contains an adjusted building area of 3,232 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 3,300 SF and the unit mix is comprised of four two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units and fenced on -site parking for four cars. The property appears to be adequately maintained, with no signs of notable deferred maintenance. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 -6- SUMMARY OF SALIENT FACTS AND CONCLUSIONS -- Continued — Description (Continued): Property Eight consists of two detached two-story residential dwellings which were built in 1927, and contains an adjusted building area of 3,107 SF, as,er the Public Records of Miami - Dade County, Florida. The' property is utilized as a rooming house, and contains a total Gross Building Area of 3,388 SF and the unit mix is comprised of nine rooms with two common bathrooms in the southern (front) building and seven rooms with four bathrooms at the northern (rear) building. The property appears to be adequately maintained, with no signs of notable deferred maintenance. Flood Zone: Zoning: Property Nine consists of a rectangular site with 5,300 SF, as per the Public Records of Miami -Dade County, Florida. The site has 50 feet of frontage along the north side of N.W. 58th Terrace and a depth of 106 feet. The site is level at street grade, with no vegetation. Property Ten consists of a rectangular one-story CBS building which contains a Gross Building Area of ± 435 SF. The features include a wall -mounted A/C unit (not installed; currently boarded -up); vinyl tile floors; plaster ceilings; painted concrete walls; and a restroom. The building is currently vacant. Property Eleven consists of a rectangular site with 6,000 SF, as per the Public Records of Miami -Dade County, Florida. The site has 50 feet of frontage along the north side of N.W. 54th Street and a depth of 120 feet. The fenced site is level at street grade, with no vegetation. Flood Zone "X" - Areas determined to be outside 500-year flood plain; National Flood Insurance Program, Community Panel Number 12025C-0180J, as revised March 2, 1994. R-3 Multi -Family Medium Density Residential District for Properties 1, 2, 3, 4, 5, 6, 7 and 9 C-1 City of Miami - Restricted Commercial District for Properties 8 and 11 SD-1 City of Miami - Martin Luther King Boulevard Commercial District for Property 10 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 7 - SUMMARY OF SALIENT FACTS AND CONCLUSIONS -- Continued — Highest and Best Use: The Highest and Best Use of the subject sites, as vacant, would be for their assemblage with adjacent sites, for the development of multi -family apartment buildings, under an affordable housing program, within the constraints of the applicable zoning criteria. The Highest and Best Use of the subject residential properties, as improved, would be for their continued use as multi -family apartment buildings, since the market value as improved is higher than the market value of the site, as if vacant. Property Rights Appraised: Date of Appraisal, Inspection and Valuation: Fee Simple Interest June 22, 2001 MARKET VALUE ESTIMATES IN "AS IS" CONDITION: Income Sales Comparison Reconciled Approach Approach Value Property 1 $400,600 $360,000 $380,000 Property 2 $122,500 $120,000 $121,000 Property 3 $122,500 $120,000 $121,000 Property 4 $121,600 $120,000 $121,000 Property 5 $122,400 $120,000 $121,000 Property 6 $360,400 $325,000 $340,000 Property 7 $103,300 $120,000 $110,000 Property 8 $144,100 $144,500 $144,250 Property 9 n/a $9,500 $9,500 Property 10 n/a $14,000 $14,000 Property 11 n/a $10,300 $10,300 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33I33 -8- • View ofProperty 1 (MHZ- N.W. 2001 View of Property 1 • Ni & '.' • Apprai, 3121 szttite View of Property 2 (MHZ-1.90: 1251 V. 59th • June 22, 2001 View of Property 2 iu 22, 2001 3121 (....ow;: .4 View of Property 3 (MHZ-192; 127 59th SC,, View of Property .; - 19,2 i J.B. ALIJA Real Estate 3121 •.i:sti,dore Plata. 22, 2001 2001 View of Property 4 (MHZ-199: 1260 N 59th Street, Miami)- June 22, 2001 I and (,.,prictiltanr View of Property 5 (MHZ-200, 1254 N.W. 59th Street, Miami) - June 22, 2001 2 _ 001 ;3:. 1, �;•,;, .;:,, r trirl ! ntlgtit4111', View of Property 6 (MHZ-45, 'N W. 61st Street. Miami) - June 22, 2001 View of Property 6 (114117 • 3121 Com, 11114,71CRY,S111.40.. , r • 61Ni .i. Miami) - June " 100] XSSOC1.\ INC. .lisers and k .4,osuItants siM • 'rove. Florida 331.3 • „ „ ,-.1...»,a1,Atidtatatraxii4-444,Vatr. •lokoolfo . ,, • , ”' View of Property 7 (MHZ-58; 1202 N.W. 61st Street, Miami) - June 22, 2001 • k • ' , . ' • • ' • Y.1.4".-,P - • ' • • View of Property 7 (MHZ-58; 1202 N.W. olst Street. Mam iun2: 2001 ALHALE & ASSOCIATES. INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza. Suite 200 • Coconut Grove. Florida 3313.= 15 View of Property 8 (MHZ-749; 1613 N.W View of Property \1 f i • '-49, ; ., I3 N J i ALHALF. & Rear Estate Apprai . ?12' Plaza. Suite �+ 7v1.iami ) itl; 22, 2001 2.2, 2001 _ g View of Property 8 (MHZ-749; 161 View of Property !• Rai ,pilinotiort. rat. 1:1-1 StretT Miami) - June 22, 2001 : \Ilan:Lk June 22 2001 {.1. IA C.' %KIN 1-lorda 33133 ss; View of Property 9 (MHZ-209; 1241 N.W. 58th Terrace, Miami) - June 22, 2001 View of Property 10 (MHZ-9; 1492 N.W. 62nd Street, Miami) - June 22, 2001 J.B. ALHALE & ASSOCIATES, ENC. Real Estate Appraisers and Consultants 3121 C onunodore Plaza. Suite 200 + Coconut Grove, Florida 33133 - 18- T irtr' ''1 Aryl •'Y S wµ 7 Lei i� ti _5„1 i View of Property 10 (MHZ-9; 1492 N.W. 62nd Street, Miami) - June 22, 2001 View of Property 1 t (MHZ-T c): 11)2 N.\A'. 54t11 Street, Miami) - June 22, 2001 J.13. ALHALE. & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 10 - PURPOSE/'UNCTION OF THE APPRAISAL The purpose of this appraisal report is to provide estimates of the Highest and and the Market Value of the Fee Simple Interest in the subject properties in their current "as is" condition, as of June 22, 2001. The function of this appraisalBest Use, the client (City of Miami) in executive decision making and potential purchase report is to assist subject properties. of the SCOPE OF THE APPRAISAL I have made a physical inspection of the subject properties, reviewed the income expense data, and performed market research to provide estimates of the Highest anted Best Use, and the Market Value of the Fee Simple Interest in the subject ro their current "as is" condition, as of June 22, 2001. P parties in The scope of the appraisal involves the research and analysis of f the subject properties, as well as market data necessary for the development Income Capitalization and Sales Comparison Approaches y actual data relative to 3, 4, 5, 6, 7 and 8; the Sales Comparison Approach to Value (landP of the to Value for Properties 1, 2, Properties 9 and 11; and the Cost Approach to Value for Property valuation) for 3, 4, 5, 6, 7 and 8 were built between 1927 and 1979, and reflect I gal non-10. conforming 1, 2, structures and therefore, the Cost Approach to Value was not applicable and has not beenn utilized. The data and information used in developing our findings, projections and valuation estimates have been derived from published information, direct interviews, analysis similar properties and other sources which were considered appropriate, te of this report.Y s of as of the date PROPERTY RIGHTS APPRAISED This appraisal report assumes marketable and insurable fee simple title. The appraisal is made with the understanding that the present ownership of the property sall e rights that may be lawfully held under a fee simple estate. P' includes all the Fee simple is defined in The Dict'o a of e 1 Es e was sponsored by the American Institute of Real Estate Appraises sg o84 llows: on,: ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power and taxation, DATE OF VALUATION June 22, 2001. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 20 - STATEMENT OF OWNERSHIP AND HISTORY Refer to the summary of ownership. Properties One and Six were purchased for $435,000 on June 30, 2000 from Turnberry Bank out of foreclosure, as recorded in Book 19186, Page 3538 of the Official Public Records of Miami -Dade County, Florida. Property One has been listed for sale at $449,000, while Property Six has been listed for sale at $379,000. Property Two was purchased for $115,000 on December 8, 2000 from Heavenly Properties, Inc., as recorded in Book 19405, Page 197 of the Official Public Records of Miami -Dade County, Florida. Property Three was purchased for $115,000 on November 2, 2000 from Heavenly Properties, Inc., as recorded in Book 19354, Page 4606 of the Official Public Records of Miami -Dade County, Florida. Property Four was purchased for $115,000 on November 1, 2000 from Heavenly Properties, Inc., as recorded in Book 19354, Page 4581 of the Official Public Records of Miami -Dade County, Florida. Property Five was purchased for $115,000 on December 8, 2000 from Heavenly Properties, Inc., as recorded in Book 19413, Page 2248 of the Official Public Records of Miami -Dade County, Florida. Property Seven was purchased for $90,000 on October 16, 1996 from John E. Jackson, Jr., as recorded in Book 17400, Page 130 of the Official Public Records of Miami -Dade County, Florida. Property Nine was purchased for $5,800 on January 23, 2001 from Clinton Marabel through a quit -claim deed, as recorded in Book 19602, Page 1446 of the Official Public Records of Miami -Dade County, Florida. Property Ten was purchased (with other properties) for $90,000 on December 19, 1996 from Mohammed Hamdeh, as recorded in Book 17478, Page 2663 of the Official Public Records of Miami -Dade County, Florida. • There was no arm's-length transfer of ownership at the remaining subject properties within the last five years, as per the Public Records of Miami -Dade County, Florida. ESTIMATED MARKETING PERIOD Based on my analysis of the market, it is my opinion that if the individual subject properties were listed for sale with an experienced Realtor, the marketing period would be approximately six months to one year. This marketing period is considered to represent the most probable amount of time necessary to expose and actively market the subject properties to achieve a sale consistent with the Market Value. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 -21 - DEFINITION of MARKET VALUE Market Value is defined in Institute as follows: Thglippaiuuusilata,Tenth Edition, by the Appraisal The most probable price, as of a specified date, in cash, or in terms cash, or in other precisely revealed terms, for which the s equivalent rig tos should sell after reasonable exposure in a competitivepacified property conditions s requisite to fair sale, with the buyer and seller eacacting market under all conditions and for self-interest and assuming that neither is under undueprudent, and Fundamental assumptions and conditions presumed in this definition are: I. Buyer and seller are motivated by self-interest 2. Buyer and seller are well informed and are acting prudently. 3. The property is exposed for a reasonable time on the open market. 4. Payment is made in cash, its equivalent, or in specified financing 5. Specified financing, if an terms. generally available for they' property be thefinancing in its ogcactually le on' the effective place °r on rerms date. P P' type appraisal b. The effect, if any, on the amount of Market Value of atypical financing, services, or fees shall be clearly and precisely revealed in the appraisal report. Market Value is defined as per current Federal regulatory agency criteria as The most probable price which a propertyfollows: market under all conditions requiites ta fairl sale, the buyer and ring in a iseller, open acting prudently, knowledgeably and assuming the price is not affected byundue stimulus. due Implicit in this definition is the consummation the passing of title from seller to buyer under a. buyer and seller are typically motivated; b. both parties are well informed or well consider their own best interests; of a sale as of a specified date and conditions whereby: advised, and acting in what they c. a reasonable time is allowed for exposure in the open market; J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 22 - DEFINITION OF MARKET VALUE -- Continued — d. payment is made in terms of cash in U.S. dollars or in terms of fnarrial arrangements comparable thereto; and e. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. NEIGHBORHOOD ANALYSIS The subject properties are located between N.W. 12th Avenue and N.W. 17th Avenue, and between N.W. 54th Street and N.W. 62nd Street, in the City of Miami. The major roadways serving the area include Interstate 95, N.W. 17th Avenue, N.W. th Avenue, N.W. 54th Street and N.W. 62nd Street. The subject neighborhood is a compatible mixture of duplexes, four-plexes, rental apartments and vacant lots, as well as service establishments situated along, N.W. 54th Street, N.W. 17th Avenue and N.W. 62nd Street. The condition of properties in the subject neighborhood are very poor (vacant and vandalized buildings) to average. DESCRIPTION OF THE SITES Refer to the Summary of Salient Facts, for size. The subject sites are level at street grade, and do not have any apparent drainage or other problems which would restrict or limit the use of the sites. No soil boring tests or engineering reports were submitted to the appraiser; however, the sites are assumed to have stable subsoil conditions as do most properties in the inunediate area. We have not been informed of an adverse subsoil condition revealed by an environmental assessment conducted by a firm with experience in identifying such substances, nor are we qualified to detect such substances that may exist. For valuation purposes, we have assumed that the subject sites would be typical for properties located in the subject area with no apparent soil problems which would restrict or limit the usage of the sites. If any adverse subsoil conditions are identified and do exist, these conditions would have a material affect on the Market Value of the subject properties. Our analysis assumes the property to be free of any adverse subsoil conditions, and is subject to the satisfactory removal of any existing contaminating materials in accordance with technical, environmental and governmental guidelines. UTILITIES The public utilities available to the subject sites include electricity, water, sewer, and telephone service. Police and fire protection services are provided by the City of Miami. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 * Coconut Grove, Florida 33133 - 23 - FLOOD ZONE Flood Zone "X" - Areas determined to be outside 500-year flood plain; National Flood Insurance Program, Community Panel Number 12025C-0180J, as revised March 2, 1994. ZONING Properties 1, 2, 3, 4, 5, 6, 7 and 9 are Located within the jurisdiction of the City of Miami and classified as R-3 Multi -Family Medium Density Residential District. The intent of this zoning classification is to allow for a variety of multi -family uses including low to mid -rise apartment structures with a maximum density of 65 units/acre and a maximum floor area ratio of .75. Uses permitted within the R-3 District include, but are not limited to, two-family buildings, multi -family buildings, hotels/motels (limited areas), --- adult-care facilities, churches, and child-care facilities. The following are some of the requirements for the R-3 zoning: Minimum lot size: Minimum Lot Width: Maximum Density: Floor Area Ratio: Building Footprint: Green Space: Maximum Height Limitation: Setback: Off-street Parking: 5,000 SF 50 feet 65 units/acre . 75 times the gross lot area . 40 times the gross lot area .15 times the gross lot area 50 feet from the flood level or average sidewalk elevation, whichever is higher Front - 20 feet Side - 10 feet Rear - 10 feet, except when abutting R-1 and R-2 districts, in which case it will be 20 feet One parking space/300 SF of office area; one parking space per efficiency and 1-BR units and two spaces per 2-BR units. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 24 - ZONING -- Continued — Properties 8 and 11 are located within the C-1 Restricted Commercial District, while Property 10 is located within the SD-1 Martin Luther King Boulevard Commercial District (refer to the Addenda, for the zoning ordinance. The specifications in the SD-1 District are same as the C-1 District). The C-1 District allows structures used as any type of residential facility except for rescue missions, to a maximum density equivalent to R-4, subject to the same limiting conditions; any activity included in the office designation, commercial marinas and living quarters on vessels with s and mixed -use or commercial activities which generally serve the daily retailing and service needs of the public, typically requiring easy access b ivatp automobiles. This category is located preferably in areas directly pedestrians and al or collector roadways, or directly accessible via mass transportation system. Minimum lot size: Minimum Lot Width: Floor Area Ratio: Building Footprint: Green Space: Maximum Height Limit: Setback: Off-street Parking: 5,000 SF 50 feet 1.72 times the gross lot area .40 times the gross lot area .10 times the gross lot area Unlimited; however, the maximum height of a building at the base line is equal to the sum of the right-of-way, plus the two front setbacks on either side of the right-of-way, or 120 feet, whichever is greater. Front - 10 feet Side - No setback required, or the same as the abutting district, whichever is greater Rear - 10 feet, or the same as the abutting district, whichever is greater. One parking space per 300 SF of office area; • one parking space per 50 SF of gross building area for meeting halls and places of general assembly; one parking space per 100 SF of gross building area for restaurants, private clubs, lodges and banquet halls; one parking space per 250 SF of gross building area for discount membership merchandisers; one parking space per 300 SF of gross building area for all other non-residential uses. One parking space per efficiency and 1-BR units and two spaces per 2-BR units. The subject properties are legal non -conforming uses (lack of up -to -code off-street parking) which are compatible with the subject neighborhood. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 25 - ASSESSMENT AND REAL ESTATE TAXES The subject properties are located within the City of Miami and are subject to both the City of Miami and Miami -Dade County ad valorem taxes on real and personal property. Property jjs assessed at $165,315, with resultant real estate taxes of $8,576.99. Property 2 is assessed at $61,784, with resultant real estate taxes of $2,291.89. Property 3 is assessed at $61,876, with resultant real estate taxes of $2,294.41. Property 4 is assessed at $65,078, with resultant real estate taxes of $2,382.10. Property 5 is assessed at $62,193, with resultant real estate taxes of $2,303.10. Property 6 is assessed at $154,628, with resultant real estate taxes of $7,384.32. Property 7 is assessed at $110,838, with resultant real estate taxes of $3,335.18. Property 8 is assessed at $50,049, with resultant real estate taxes of $2,914.53. The real estate taxes are reported to be delinquent. Property 9 is assessed at $5,867, with resultant real estate taxes of $160.66. The real estate taxes are reported to be delinquent. Property 10 is assessed at $5,976, with resultant real estate taxes of $163.66. Property 11 is assessed at $8,025, with resultant real estate taxes of $219.74. The real estate taxes are reported to be delinquent. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 26 - MULTI -FAMILY RESIDENTIAL MARKET OVERVIEW Rental Apartment Market According to the Housing Report prepared by Reinhold P. Wolff Economic Research, Inc., the vacancy rate in mature (18 months and older) rental apartment complexes in Dade County was 2.2 % in February 2001; 2.1 % in November 2000; 1.8 % in August 2000; 2.49% in May 2000; 1.9% in February 2000; 2.8% in November 1999; 3.0% in August 1999; 4.1 % in May 1999; 4.3 % in February 1999; 4.7% in November 1998; 4.9% in August 1998; 5.2% in May 1998; 5.5% in February 1998; 5.5% in November 1997; and 2.8% in August 1997. At the end of December 2000, there were 57 new never before occupied rental units available throughout Dade County. This is notably less than the 164 units available in September 2000. This inventory represents only .2 month of supply at the rate of absorption of new units over the past six months. Based on the estimated annual demand for 4,004 new apartment units in Dade County, the inventory could total 2,002 units without being excessive. At the end of September 2000, there were 164 new never before occupied rental units available throughout Dade County. This is notably less than the 310 units available in June 2000. This inventory represents only .7 month of supply at the rate of absorption of new units over the past six months. At the end of June 2000, there were 310 new never before occupied rental units available throughout Dade County. This is somewhat more than the 120 units available in March 2000. This inventory represents only 2.5 month of supply at the rate of absorption of new units over the past six months. Based on the estimated annual demand for 4,004 new apartment units in Dade County, the inventory represents less than one month of supply. At the end of March 2000, there were 231 new never before occupied rental units available throughout Dade County. This is somewhat more than the 120 units available in December 1999. This inventory represents only 2.8 month of supply at the rate of absorption of new units over the past six months. Based on the estimated annual demand . for 4,004 new apartment units in Dade County, the inventory represents less than one month of supply. According to the first quarter 2001 Housing Report prepared by Reinhold P. Wolff Economic Research, Inc., during the fourth quarter of 2000, a total of 694 new rental apartment units were absorbed in Dade County. This is 2.8 times the 246 units absorbed in the preceding quarter. During 2000, a total of 2,404 new apartment units were absorbed, 2.1 times the 1,139 units absorbed during 1999. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 -27- MULTI-FAMII,Y RESIDENTIAL MARKET OVERVIEW -- Continued -- &litsiLApleasmitinilaa According to the fourth quarter 2000 Housing Report prepared by Reinhold P. Wolff Economic Research, Inc., during the third quarter of 2000, a total of 980 new rental apartment units were absorbed in Dade County. This is almost the twice as the 485 units absorbed in the preceding quarter, and is 3.5 times greater than the 281 units absorbed in the third quarter of 1999. Through September 2000, a total of 1,710 new apartment units were absorbed, 91.5 % more than the 893 units absorbed during the same period in 1999. According to the third quarter 2000 Housing Report prepared by Reinhold P. Wolff Economic Research, Inc., during the second quarter of 2000, a total of 485 new rental apartment units were absorbed in Dade County. This is almost the twice as the 245 units absorbed in the preceding quarter, and is 55.9% greater than the 311 units absorbed in the second quarter of 1999. Through June 2000, a total of 730 new apartment units were absorbed, 19.3 % more than the 612 units absorbed during the same period in 1999. According to the second quarter 2000 Housing Report prepared by Reinhold P. Wolff Economic Research, Inc., during the first quarter of 2000, a total of 245 new rental apartment units were absorbed in Dade County. This is almost the same as the 246 units absorbed in the preceding quarter, and is 18.6% less than the 301 units absorbed in the first quarter of 1999. During 1999, a total of 1,139 new apartment units were absorbed, 19.6% less than the 1,416 units absorbed in 1998. According to the first quarter 2000 Housing Report prepared by Reinhold P. Wolff Economic Research, Inc., during the fourth quarter of 1999, a total of 246 new rental apartment units were absorbed in Dade County. This is 12.5 % less than the 281 units absorbed in the preceding quarter, and is 43.1 % less than the 432 units absorbed in the fourth quarter of 1998. A total of 587 new apartment units were completed in Dade County during the fourth quarter of 2000, while 1,053 new units were under construction. New apartment starts in 2000 were 3,878 units, 3.3 times the 1,183 units started during 1999. New unit completions totaled 2,341 units in 2000, 2.8 times the number of units completed in 1999. A total of 834 new apartment units were completed in Dade County during the third quarter of 2000, while 1,242 new units were under construction. New apartment starts through September 2000 were 2,825 units, 4.7 times the 595 units started during the same period in 1999. New unit completions totaled 1,754 units through September 2000, 3.3 times the number of units completed in the same period in 1999. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Corninodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 28 - MULTI -FAMILY RESIDENTIAL MARKET OVERVIEW -- Continued -- Rental Apartment Market (Continued) A total of 564 new apartment units were completed in Dade County during the second quarter of 2000, while 525 new unit& were under construction. New apartment starts through June 2000 were 1,583 um**, 9.5 tunes the 166 units started in the first half of 1999. New unit completions totaled 920 units through June 2000, 2.8 times the number of units completed in the same period in 1999. A total of 356 new apartment units were completed in Dade County during the first quarter of 2000, while 1,058 new units were under construction. New apartment starts during 1999 were 1,183 units, 52.9% less than started in 1998. New unit completions totaled 834 units in 1999, down 43.7% from the 1,481 units completed in 1998. For the six month period ending with December 2000, an average of 279 new rental units were absorbed each month. A total of 57 new units were available at the end of December 2000, and this represented .2 month of supply at the pace of absorption over the past six months. During the six month period, an average of 237 units were being completed each month, while 383 units were started each month. For the six month period ending with September 2000, an average of 244 new rental units were absorbed each month. A total of 164 new units were available at the end of September 2000, and this represented .7 month of supply at the pace of absorption over the past six months. During the six month period, an average of 233 units were being completed each month, while 295 units were started each month. For the six month period ending with June 2000, an average of 122 new rental units were absorbed each month. A total of 310 new units were available at the end of June 2000, and this represented 2.5 months of supply at the pace of absorption over the past six months. At the estimated annual demand level for apartments in Dade County, the inventory represents Less than one month of supply. During the six month period, an average of 153 units were being completed each month, while 264 units were started each month. For the six month period ending with March 2000, an average of 82 new rental units were absorbed each month. A total of 231 new units were available at the end of March 2000, and this represented 2.8 months of supply at the pace of absorption over the past six months. At the estimated annual demand level for apartments in Dade County, the inventory represents less than one month of supply. During the six month period, an average of 110 units were being completed each month, while 274 units were started each month. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 29 - MULTI -FAMILY RESIDENTIAL MARKET OVERVIEW -- Continued -- Rental_Apartment Market (Continued) For the six month period ending with December 1999, an average of 88 new rental units were absorbed each month. A total of 120 new units were available at, t,; end of December 1999, and this represented 1.4 months of supply at the pace of absorption over the past six months. At the estimated annual demand level for apartments in Dade County, the inventory represents .4 month of supply. During the six month period, an average of 84 units were being completed each month, while 170 units were started each month. The overall average monthly rent for apartments in mature rental developments in Dade County increased by $19.00 to $895 from November 2000 to February 2001. The February 2001 overall average rent is 8.7% higher than the $823 average rent found a year earlier. The annualized rate of increase in rents over the past three months is 8.8 %. During the most recent three month period, one -bedroom rents increased by $22 to $783, two -bedroom rents increased by $19 to $991 and three -bedroom rents increased by $16 to $1,220. Efficiency unit rents increased by $10 to $657. Changes in projects participating in the surveys from one period to another can result in considerable fluctuations for efficiency and three -bedroom units where the supply is more Iimited. The overall average monthly rent for apartments in mature rental developments in Dade County increased by $12.00 to $876 from August 2000 to November 2000. The November 2000 overall average rent is 8.8 % higher than the $805 average rent found a year earlier. The annualized rate of increase in rents over the past three months is 5.6%. During the most recent three month period, one -bedroom rents increased by $2 to $761, two -bedroom rents increased by $24 to $972 and three -bedroom rents increased by $3 to $1,208. Efficiency unit rents increased by $16 to $647. Changes in projects participating in the surveys from one period to another can result in considerable fluctuations for efficiency and three -bedroom units where the supply is more limited. The overall average monthly rent for apartments in mature rental developments in Dade County increased by $22.00 to $864 from May 2000 to August 2000. The August 2000 overall average rent is 8.7% higher than the $795 average rent found a year earlier. The annualized rate of increase in rents over the past three months is 10.4 % . During the most "recent three month period, one -bedroom rents increased by $23 to $759, -two- bedroom rents increased by $21 to $948 and three -bedroom rents increased by $27 to $1,205. Efficiency unit rents increased by $25 to $631. The overall average monthly rent for apartments in mature rental developments in Dade County increased by $19.00 to $842 from February 2000 to May 2000. The May 2000 overall average rent is 7.4% higher than the $787 average rent found a year earlier. The annualized rate of increase in rents over the past three months is 9.2%. During the most recent three month period, one -bedroom rents increased by $17 to $736, two -bedroom rents increased by $20 to $927 and three -bedroom rents increased by $32 to $1,174. Efficiency unit rents increased by $19 to $606. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 30 - MULTI -FAMILY RESIDENTIAL MARKET OVERVIEW -- Continued -- Rental Apartment Market (Continued) The overall average monthly rent for apartments in mature rental developments in Dade County increased by $18.00 to $823 from November 1999 to February 2000. The February 2000 overall average rent is 7.4% higher than the $766 average rent found a year earlier. The annualized rate of increase in rents over the past three months is 8.8%. During the most recent three month period, one -bedroom rents increased by $18 to $719, two -bedroom rents increased by $17 to $907 and three -bedroom rents increased by $18 to $1,142. Efficiency unit rents increased by $28 to $587. Condominium Apartment Market According to the 1st. Quarter 2001 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 883 new condominium units were sold in Dade County during the 4th Quarter of 2000. The 4th quarter sales were 8.9% greater than the 811 units sold in the 3rd Quarter of 2000. New condominium sales during 2000 have totalled 3,079 units, up 8.1 % from the 2,848 units sold during 1999. According to the 4th Quarter 2000 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 811 new condominium units were sold in Dade County during the 3rd Quarter of 2000. The 3rd quarter sales were 28.3 % greater than the 632 units sold in the 2nd Quarter of 2000. New condominium sales through September 2000 have totalled 2,196 units, down 3.5% from the 2,276 units sold during the same period in 1999. According to the 3rd Quarter 2000 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 632 new condominium units were sold in Dade County during the 2nd Quarter of 2000. The 2nd quarter sales were 16.1 % less than the 753 units sold in the 1st Quarter of 2000. New condominium sales through June 2000 have totalled 1,385 units, down 5.7% from the 1,468 units sold during the first half 1999. According to the 2nd Quarter 2000 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 753 new condominium units were sold in Dade County during the 1st Quarter of •2000. The 1st quarter sales were 31.6 % greater than the 572 units sold in the 4th Quarter of 1999. New condominium sales during 1999 have totalled 2,848 units, down 17.7% from the 3,459 units sold during 1998. According to the 1st Quarter 2000 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 572 new condominium units were sold in Dade County during the 4th Quarter of 1999. The 4th quarter sales were 29.2% less than the 808 units sold in the 3rd Quarter of 1999. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 3 1 - MULTI -FAMILY RESIDENTIAL MARKET OVERVIEW -- Continued -- Condominium Apartment Market - Continued According to the 4th Quarter 1999 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 808 newcondominium units were sold• in Dade County during the 3rd Quarter of 1999. The 3id quarter sales were 3.3 % less than the 836 units sold in the 2nd Quarter of 1999. New condominium sales during the first nine months of 1999 have totalled 2,276 units, down 17.5% from the 2,578 units sold during the same period in 1998. According to the 3rd Quarter 1999 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 808 new condominium units were sold in Dade County during the 3rd Quarter of 1999. The 3rd quarter sales were 3.3% less than the 836 units sold in the 2nd Quarter of 1999. New condominium sales through September 1999 have totalled 2,276 units, down 17.5 % from the 2,758 units sold during the same period in 1998. According to the 2nd Quarter 1999 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 632 new condominium units were sold in Dade County during the 1st Quarter of 1999. The 1st quarter sales were 9.8% Less than the 701 units sold in the 4th Quarter of 1998. New condominium sales during 1998 have totalled 3,459 units, down 11.4% from the 3,906 units sold during 1997. According to the 1st Quarter 1999 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 701 new condominium units were sold in Dade County during the 4th Quarter of 1998. The 4th Quarter sales were 35.8% less than the 1,092 units sold in the 3rd Quarter of 1998. According to the 4th Quarter 1998 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 1,092 new condominium units were sold in Dade County during the 3rd Quarter of 1998. The 3rd Quarter sales were 27.1 % more than the 859 units sold in the 2nd Quarter of 1998. New condominium sales through September 1998 have totalled 2,758 units, down 3.2% from the 2,850 units sold during the same period in 1997. According to the 3rd Quarter 1998 Dade County Housing Market Report prepared by Reinhold P. Wolff Economic Research, Inc., a total of 859 new condominium units were sold in Dade County during the 2nd Quarter of 1998. The 2nd Quarter sales were 6.4% more than the 807 units sold in the 1st Quarter of 1998. New condominium sales through June 1998 have totalled 1,666 units, down 19.9% from the 2,080 units sold during the same period in 1997. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 32 - TIE VALUATION PROCESS The valuation process is defined in the 1993 Edition of the Dictionary of Real Estate Appraisal which was sponsored by the Appraisal Institute as follows: A systematic procedure employed to provide the answer to a client's question about the value of real property• The scope of the appraisal involves the research and analysis of factual data relative to the subject properties, as well as market data necessary for the development of the Income Capitalization and Sales Comparison Approaches to Value for Properties 1, 2, 3, 4, 5, 6, 7 and 8; the Sales Comparison Approach to Value (land valuation) for Properties 9 and 11; and the Cost Approach to Value for Property 10. The Income Approach to Value is typically based upon the projected income and expense characteristics used within a Discounted Cash Flow model or direct capitalization method. The analysis of the subject properties in a continued rental apartment use is based on the income and expense characteristics applicable to the subject buildings. Income producing properties are generally purchased on the basis of their anticipated net income. The Direct Capitalization Method converts an estimate of a single year's income. expectancy into an indication of value either by dividing the income estimate by an appropriate income rate or by multiplying the income estimate by an appropriate factor. The rate or factor selected represents the relationship between income and value observed in the market. The Sales Comparison Approach to Value is based on a comparison between recently sold similar properties in the subject neighborhood and the subject properties. These comparable sales are then adjusted for the differences between them and the subject properties, utilizing the Potential Gross Income Multiplier and price/SF (for the smaller four-plex and rooming house facilities) and price/unit (for the larger rental apartment buildings) methods of comparison. The Cost Approach as applied to improved properties, requires an estimate of the value of the land, as if vacant. An estimate of the Replacement Cost New of the improvements is then estimated, as derived by the national cost data supplied by Marshall & Swift Valuation Services. From the total Replacement Cost New, an estimate of physical depreciation, functional obsolescence and external obsolescence, if applicable, is deducted. The resultant figure represents the depreciated cost of the improvements, plus the land value. The Cost Approach to Value does not take into consideration the income generation potential of a property, whereas the Income Capitalization and Sales Comparison Approaches do. Informed and rational investors of income producing properties typically pay a sales price based on net income flow. The total cost of land and improvements to create a new building and/or renovate or rehabilitate an existing building does not necessarily equal value, as the amount of contribution of the existing improvements is measured in terms of their utility in the market, as well as its benefit/ return to an investor (net income flow). Properties 1, 2, 3, 4, 5, 6, 7 and 8 were built between 1927 and 1979, and reflect legal non -conforming structures and therefore, the Cost Approach to Value was not applicable and has not been utilized. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 33 - THE INCOME CAPITALIZATION APPROACH TO VALUE The Income Capitalization Approach to Value is based upon the principle of anticipation. with value reflected as the present worth of the right to future benefits. The future benefits which accrue to ownership consist of an annual income stream and reversionary capacity of the real estate. The Income Capitalization Approach to Value is defined in The Dictionary of Real Estate Appraisal, Third Edition (Chicago: Appraisal Institute, 1993) as follows: A set of procedures through which an appraiser derives a value indication for an income - producing property by converting its anticipated benefits (cash flows and reversion) into property value. This conversion can be accomplished in two ways. One year's income expectancy can be capitalized at a market derived capitalization rate or at a capitalization rate that reflects a specified income pattern, return on investment and change in the value of the investment. Alternately, the annual cash flows for the holding period and the reversion can be discounted at a specified yield rate. The process of income capitalization requires the following analysis: 1. An estimate of potential gross income based upon market (economic rents). 2. An estimate and deduction reflecting vacancy and collection losses resulting in an estimate of effective gross income. 3 • An estimate and deduction of the operating and fixed expenses as well as a reserve for replacements in order to arrive at the net operating income (net income before recapture or debt service.) 4. An estimate of the duration of the projected income stream. 5. The development and selection of an appropriate capitalization rate and technique. 6. Application of the derived capitalization rate to the estimate of net income in order to provide an indication of value. ANALYSIS OF MARKET RENTAL RATES The terms market rent and economic rent are traditionally synonymous in appraisal practice. Market rent is defined in The Dictionary of Real Estate Appraisal, Third Edition (Chicago: Appraisal Institute, 1993) as follows: The rental income that a property would most probably command on the open market; indicated by current rents paid and asked for comparable space as of the date of the appraisal. An analysis of comparable rental apartment buildings was performed to provide market rental rates and vacancy levels. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite ZOO • Coconut Grove, Florida 33133 - 34 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Comparable Rental Apartment Qoe Address: 1601 N.W. 62nd Street Miami, Florida Type: 2-story rental apartment building Year Built: 1953 Condition: Average No. of Units: 28 Rental Rates: Unit Rental Type Llk 1 BR-1 BATH $325 Lease Terms: Month -to -month Occupancy: 100% Comments: This property was sold for $320,000 or ,$11,400/unit in January 2001, with a Potential Gross Income Multiplier of 2.93. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33I33 - 35 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Comparable Rental Apartment Two Address: 1575 N.W. 59th Street Miami, Florida Type: 2-story rental apartment building Year Built: 1962 Condition: Average No. of Units: 11 Rental Rates: Unit Rental rilym Role Efficiency $250 1 BR-1 BATH $285-$300 Lease Terms: Month -to -month Occupancy: 81. 8 % Comments: This property was sold for $98,500 or $9,000/unit in November 2000, with a Potential Gross Income Multiplier of 2.59. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 36 - Comnsn6le Renr I Aoa e�� Th L THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Address: 1251 N.W. 59th Street Miami, Florida Type: 2-story rental apartment building Year Built: 1965 Condition: Average No. of Units: 4 Rental Rates: Unit Rental 2 BR-1 BATH $450 Lease Terms: Month -to -month Occupancy: 100% Comments: This property was sold for $115,000 or .$28,800/unit in December 2000, with a Potential Gross Income Multiplier of 5.32. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33I33 - 37 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Comparable Rental Apartment Four Address: 1255 N.W. 58th Street and 1256 N.W. 58th Terrace Miami, Florida Type: 3-story rental apartment building Year Built: 1959 Condition: Average No. of Units: 36 Rental Rates: Unit Rental Tag Rate Efficiency $210 1 BR-1 BATH $285 2 BR-1 BATH $315 Lease Terms: Month -to -month Occupancy: 94.4% Comments: The property consists of two L-shaped three-story 18-unit CBS apartment buildings which were built in 1959, and contains a total adjusted building area of 15,896 SF, as per the Public Records of Miami -Dade County, Florida. The 36-unit building contain a total Gross Building Area of 18,390 SF and the unit mix is comprised of two efficiency, twenty-one one bedroom - one bathroom and thirteen two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units and on -site parking. The property appears to be adequately maintained, with no signs of notable deferred maintenance. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 38 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Comparable Rental Apartment Five Address: 6091 N.W. 15th Avenue Miami, Florida Type: 2-story rental apartment building Year Built: 1957 Condition: Average No. of Units: 15 Rental Rates: Unit Rental Type Rate 1 BR-1 BATH $225 2 BR-1 BATH $285 3 BR-2 BATH $450 Lease Terms: Month -to -month Occupancy: 95% Comments: This U-shaped two-story 15-unit CBS apartment building was built in 1957, and contains an adjusted building area of 7,414 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 7,800 SF and the unit mix is comprised of eight one bedroom -one bathroom, six two bedroom -one bathroom and one three bedroom -two bathroom units. The unit features include window/wall- mounted A/C units; security entrance and on -site parking. The property appears to be adequately maintained, with no signs of notable deferred maintenance. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 39 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued — Comparable Rental Apartment Six Address: 1520 N.W. 61st Street Miami, Florida TyPe: 3-story rental apartment building Year Built: 1957 Condition: Average No. of Units: 18 Rental Rates: Unit Rental Type Itak 1 BR-1 BATH $325 2 BR-1 BATH $425 Lease Terms: Month -to -month Occupancy: 100 Comments: This L-shaped three-story 18-unit CBS apartment building was built in 1957, and contains an adjusted building area of 8,164 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 8,829 SF and the unit mix is comprised of twelve one bedroomone bathroom and six two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units; security entrance and on -site parking. Pursuant to its purchase in March 1999, the property has reportedly undergone a rehabilitation program at a cost of $20,000. The property appears to be adequately maintained, with no signs of notable deferred maintenance. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 40 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- SUMMARY OF RENTAL, RATES FOR RENTAL APARTMENTS Total Monthly Adams Year Built/ No. of Unit Rent CLUP7Ag1 Oonditign Units Tyco Spa 1) 1601 N.W. 62nd Street 100.0% 1953 28 1 / 1 Miami, Florida Average $325 $325 2) 1575 N.W. 59th Street 81.8% 1962 9 Efficiency $250 Miami, Florida Average 2 1 / 1 $200 $285 $300 3) 1251 N.W. 59th Street 100.0% 1965 4 2 / 1 Miami, Florida Average $450 $450 4) 1255 N.W. 58th Street & 94.4% 1959 2 Efficiency $210 $210 1256 N.W. 58th Terrace Average 21 1 / 1 $285 Miami, Florida 13 21 1 $315 $285 $315 5) 6091 N.W. 15th Avenue 95.0% 1957 8 1 / 1 $225 $225 Miami, Florida Average 6 2 / 1 $285 $285 1 3/2 $450 $450 6) 1520 N.W. 61 st Street Miami, Florida 100.0% 1957 12 1 / 1 Average 6 2 / 1 $325 $325 $425 $425 Law High Efficiency $210 $250 1/1 $225 $325 2 / 1 $285 $450. 3/2 $450 $450 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- MARKET RENTAL RATE ANALYSIS AND CONCLUSIONS A survey of comparable rental apartments was made in order to analyze the existing rents at the subject property, and to provide an indication of market rental rates and occupancy levels which would be applicable to the subject property in a continued rental use. The comparable rental apartments are located within the subject neighborhood, and were considered somewhat similar to the subject properties in terms of condition, appeal, age, amenities, parking and location. The unadjusted monthly rental rates within the competitive facilities were: $210 to $250 for efficiency apartments; $225 to $325 for one bedroom -one bathroom apartments; $285 to $450 for two bedroom -one bathroom apartments; and $450 for three bedroom -two bathroom apartments. ESTIMATE OF GROSS INCOME The preceding market analysis of rental apartment facilities has served as a basis to project the rental rates applicable to the subject properties, and to estimate the potential rental income. ANCILLARY INCOME The ancillary income typically includes coin -operated laundry income, key deposits, late rent fees, forfeited deposits, etc. There was no ancillary income applicable to the subject properties. VACANCY AND COLLECTION LOSS We have estimated the vacancy and collection loss factor at 7.5 % (an average of approximately four weeks per year vacancy, tenant turn -over or collection loss at a stabilized operation). OPERATING EXPENSES The landlord is responsible for real estate taxes, insurance, management, common area electricity (if applicable), water and sewer; gas (if applicable), waste removal, repairs and maintenance, legal and professional fees, miscellaneous expenses, and reserves for replacement. We have interviewed the property owners, reviewed the operating expenses at the subject properties, and analyzed the operating expense data on a per unit and per square foot basis. The following is an explanation of the estimated operating expenses under typical stabilized operations. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 42 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- PROPERTY ONE (1250 N.W. 62nd Street, Miami) Grosse Income The Potential Gross Income was estimated at $104,040, with an Effective Gross Income of $96,240. Operating Expenses After a 4.0% discount for prompt payment, the real estate taxes are estimated at $8,230. The insurance expense was estimated to be $4,725. Management reflects the cost of overseeing and coordinating the operations at the rental apartment facility during the projected holding period. The management fee (as well as a unit allowance for an on -site manager) is estimated to be $7,570 or 7.9% of the effective gross rental income. The subject apartment units are individually metered for electricity. The expense for the common area electricity was estimated to be $600. The water and sewer expense was estimated to be $11,400. The gas expense was estimated to be $2,040. The waste removal expense was estimated to be $2,040. The repairs, maintenance and contract services was estimated to be $5,400 (excluding reserves for replacement of short-lived items). Based on the size of the property, the legal and professional fees were estimated to be $2,025. The miscellaneous expenses were estimated to be $25/unit or $675. The landlord would be responsible for the replacement of short-lived items which were estimated to be $3,460. Refer to the facing page. Net Operating Income The total operating expenses were estimated to be $48,165 or $1,784/unit or 50.0% of the effective gross income. The net operating income before debt service was estimated to be $48,075 or $1,781/unit or 50.0% of the effective gross income. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33I33 - 43 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- PROPERTY TWO (1251 N.W. 59th Street, Miami) Gross Income The Potential Gross Income was estimated at $22,800, with an Effective Gross Income of $21,090. Operating Expenses After a 4.0% discount for prompt payment, the real estate taxes are estimated at $2,200. The insurance expense was estimated to be $430. Management reflects the cost of overseeing and coordinating the operations at the rental apartment facility during the projected holding period. The management fee is estimated to be 4.0% of the effective gross rental income or $840. The subject apartment units are individually metered for electricity. The expense for the common area electricity was estimated to be $240. The water and sewer expense was estimated at $900. The waste removal expense was estimated to be $750. The gas expense was estimated to be none. The repairs, maintenance and contract services was estimated to be $1,000 (excluding reserves for replacement of short-lived items). Based on the size of the property, the legal and professional fees were estimated to be $400. The miscellaneous expenses were estimated to be $25/unit or $100. The landlord would be responsible for the replacement of short-lived items which were estimated to be $760. Refer to the facing page. Net Operating Income The total operating expenses were estimated to be $7,620 or $1,905/unit or 36.1 % of the effective gross income. The net operating income before debt service was estimated to be $13,470 or $3,368/unit or 63.9% of the effective gross income. J.S. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 -44- THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- PROPERTY THREE (1275 N.W. 59th Street, Miami) Gross Income The Potential Gross Income was estimated at $22,800, with an Effective Gross Income of $21,090. Operating Expenses After a 4.0% discount for prompt payment, the real estate taxes are estimated at $2,200. The insurance expense was estimated to be $430. Management reflects the cost of overseeing and coordinating the operations at the rental apartment facility during the projected holding period. The management fee is estimated to be 4.0% of the effective gross rental income or $840. The subject apartment units are individually metered for electricity. The expense for the common area electricity was estimated to be $240. The water and sewer expense was estimated at $900. The waste removal expense was estimated to be $750. The gas expense was estimated to be none. The repairs, maintenance and contract services was estimated to be $1,000 (excluding reserves for replacement of short-lived items). Based on the size of the property, the legal and professional fees were estimated to be $400. The miscellaneous expenses were estimated to be $25/unit or $100. The landlord would be responsible for the replacement of short-lived items which were estimated to be $760. Refer to the facing page. Net Operating Income The total operating expenses were estimated to be $7,620 or $1,905/unit or 36.1 % of the effective gross income. The net operating income before debt service was estimated to be $13,470 or $3,368/unit or 63.9% of the effective gross income. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 do - 45 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- PROPERTY FOUR (1260 N.W. 59th Street, Miami) Gross Income The Potential Gross Income was estimated at $22,800, with an Effective Gross Income of $21,090. Operating Expenses After a 4.0% discount for prompt payment, the real estate taxes are estimated at $2,290.. The insurance expense was estimated to be $430. Management reflects the cost of overseeing and coordinating the operations at the rental apartment facility during the projected holding period. The management fee is estimated to be 4.0% of the effective gross rental income or $840. The subject apartment units are individually metered for electricity. The expense for the common area electricity was estimated to be $240. The water and sewer expense was estimated at $900. The waste removal expense was estimated to be $750. The gas expense was estimated to be none. The repairs, maintenance and contract services was estimated to be $1,000 (excluding reserves for replacement of short-lived items). Based on the size of the property, the legal and professional fees were estimated to be $400. The miscellaneous expenses were estimated to be $25/unit or $100. The landlord would be responsible for the replacement of short-lived items which were estimated to be $760. Refer to the facing page. Net Operating Income The total operating expenses were estimated to be $7,710 or $1,928/unit or 36.6% of the effective gross income. The net operating income before debt service was estimated to be $13,380 or $3,345/unit or 63.4% of the effective gross income. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 46 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- PROPERTY FIVE (1254 N.W. 59th Street, Miami) Gross Ingome The Potential Gross Income was estimated at $22,800, with an Effective Gross Income of $21, 090. Operating Expenses After a 4.0 % discount for prompt payment, the real estate taxes are estimated at $2,210, The insurance expense was estimated to be $430. Management reflects the cost of overseeing and coordinating the operations at the rental apartment facility during the projected holding period. The management fee is estimated to be 4.0 % of the effective gross rental income or $840. The subject apartment units are individually metered for electricity. The expense for the common area electricity was estimated to be $240. The water and sewer expense was estimated at $900. The waste removal expense was estimated to be $750. The gas expense was estimated to be none. The repairs, maintenance and contract services was estimated to be $1,000 (excluding reserves for replacement of short-lived items). Based on the size of the property, the legal and professional fees were estimated to be $400. The miscellaneous expenses were estimated to be $25/unit or $100. The landlord would be responsible for the replacement of short-lived items which were estimated to be $760. Refer to the facing page. Net Operating Income The total operating expenses were estimated to be $7,630 or $1,90$/.unit or 36.2% of the effective gross income. The net operating income before debt service was estimated to be $13,460 or $3,365/unit or 63.8% of the effective gross income. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 47 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- PROPERTY SIX (1231 N.W. 61st Street, Miami) Gross Income The Potential Gross Income was estimated at $92,880, with an Effective Gross Income of $85,910. Operating Expenses After a 4.0 % discount for prompt payment, the real estate taxes are estimated at $7,090. The insurance expense was estimated to be $4,200. Management reflects the cost of overseeing and coordinating the operations at the rental apartment facility during the projected holding period. The management fee (as well as a unit allowance for an on -site manager) is estimated to be $7,160 or 8.3 % of the effective gross rental income. The subject apartment units are individually metered for electricity. The expense for the common area electricity was estimated to be $600. The water and sewer expense was estimated at $9,600. The gas expense was estimated to be $1,800. The waste removal expense was estimated to be $2,040. The repairs, maintenance and contract services was estimated to be $4,800 (excluding reserves for replacement of short-lived items). Based on the size of the property, the legal and professional fees were estimated to be $1,800. The miscellaneous expenses were estimated to be $25/unit or $600. The landlord would be responsible for the replacement of short-lived items which were estimated to be $2,970. Refer to the facing page. Net Operating Income The total operating expenses were estimated to be $42,660 or $1,7781unit or 49.7% of the effective gross income. The net operating income before debt service was estimated to be $43 , 250 or $1, 802/unit or 50.3 % of the effective gross income. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 48 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- PROPERTY SEVEN (1202 N.W. 61st Street, Miami) Gross Income The Potential Gross Income was estimated at $21,600, with an Effective Gross Income of $19,980. Operating Expenses After a 4.0% discount for prompt payment, the real estate taxes are estimated at $3,200.. The insurance expense was' estimated to be $430. Management reflects the cost of overseeing and coordinating the operations at the rental apartment facility during the projected holding period. The management fee is estimated to be 4.0% of the effective gross rental income or $800. The subject apartment units are individually metered for electricity. The expense for the common area electricity was estimated to be $240. The water and sewer expense was estimated to be $900. The gas expense was estimated to be none. The waste removal expense was estimated to be $750. The repairs, maintenance and contract services was estimated to be $1,000 (excluding reserves for replacement of short-lived items). Based on the size of the property, the legal and professional fees were estimated to be $400. The miscellaneous expenses were estimated to be $25/unit or $100. The landlord would be responsible for the replacement of short-lived items which were estimated to be $800. Refer to the facing page. Net Operating Income The total operating expenses were estimated to be $8,620 or $2,155/unit or 43.1 % of the effective gross income. The net operating income before debt service was estimated to be $11,360 or $2,840/unit or 56.9% of the effective gross income. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 49 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- PROPERTY EIGHT (1613 N.W. 54th Street, Miami) Gross Incomme Property Eight is utilized as a 16-room rooming/boarding house, with weekly rates ranging from $65 to $85. The Potential Gross Income was estimated at $58,240, with an Effective Gross Income of $37,860, reflecting an annual occupancy rate of 65.0%. Operating Expenses After a 4.0% discount for prompt payment, the real estate taxes are estimated at $2,800. The insurance expense was estimated to be $800. Management reflects the cost of overseeing and coordinating the operations at the 16=unit rooming house which is rented on a weekly basis. The management fee is estimated to be 10.0% of the effective gross rental income or $3,790. Reported to be $200/month, the expense for electricity was estimated to be $2,400. Reported to be $300/quarter, the water and sewer expense was estimated to be $1,200. The waste removal expense was estimated to be $750. The repairs, maintenance and contract services was estimated to be $3,200 (excluding reserves for replacement of short-lived items). Based on the size of the property, the legal and professional fees were estimated to be $1,500. The miscellaneous expenses were estimated to be $25/unit or $500. The landlord would be responsible for the replacement of short-lived items which were estimated to be $2,190. Refer to the facing page. Net Operating Income The total operating expenses were estimated to be $19,130 or $1,196/unit or 50. 5 % of the effective gross income. The net operating income before debt service was estimated to be $18,730 or $1,171 /unit or 49, 5 % of the effective gross income. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 rn • THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued — RATES OF RETURN An investor's expected return consists of (1) full recovery of the amount invested or the return of capital arrd (2) a profit or return on capital. Rates of return can be categorized either as yield rates or income rates. The interest rate, discount rate, internal rate of return and equity yield rate are yield rates. The overall capitalization rate and equity dividend rate are income rates. The Discount Rate is a rate of return on capital used to discount future payments or receipts to present value and represents the annual rate of return necessary to attract investment capital. Discount rates are influenced by many considerations, including degree of risk, market attitudes with respect to future inflation, prospective rate of return earned by comparable investments and supply/demand for mortgage funds. We have reviewed rate of return data which is considered indicative of alternative investment vehicles available in the capital markets. Rate selection requires appraisal judgment and knowledge concerning prevailing market attitudes and prevailing economic indicators. According to the most recent survey of real estate portfolio managers as provided by the Valuation Magazine published by the Appraisal Institute, the discount rates for rental apartments ranged from 9.75 % to 15.00% in the lst Quarter of 2001, with an average of 11.41 %. The overall capitalization rates ranged from 7.0% to 10.0% in the 1st quarter of 2001, with an average of 8.58 %. The residual capitalization rates ranged from 7.5% to 10.75% in the lst quarter of 2001, with an average of 9.07%. The discount rates for rental apartments ranged from 10.00% to 15.00% in the 4th Quarter of 2000, with an average of 11.41 %. The overall capitalization rates ranged from 7.0% to 9.5% in the 4th quarter of 2000, with an average of 8.57%. The residual capitalization rates ranged from 7.5 % to 10.5% in the 4th quarter of 2000, with an average of 9.04 % . The discount rates for rental apartments ranged from 10.00% to 15.00% in the 3rd Quarter of 2000, with an average of 11.45%. The overall capitalization rates ranged from 7.0% to 9.0% in the 3rd quarter of 2000, with an average of 8.63%. The residual capitalization rates ranged from 7.5 % to 10, 5 % in the 3rd quarter of 2000, with an average of 9.1 %. The discount rates for rental apartments ranged from 10.00% to 15.00% in the 2nd quarter of 2000, with an average of 11.50 %. The overall capitalization rates ranged from 7.50% to 11.0 % in the 2nd quarter of 2000, with an average of 8.82 % . The residual capitalization rates ranged from 8.00% to 10.50% in the 2nd quarter of 2000, with an average of 9.19 % . The discount rates for rental apartments ranged from 10.00% to 15.00% in the 1st quarter of 2000, with an average of 11.50%. The overall capitalization rates ranged from 7.50% to 11.0% in the 1st quarter of 2000, with an average of 8.83 % . The residual capitalization rates ranged from 8.00% to 10.50% in the lst quarter of 2000, with an average of 9.21 %. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Direct Capitalization Method The estimated of the Market Value of the subject properties were provided by utilizing the Direct Capitalization Method which converts an estimate of a single year's income expectancy into an indication of value either by dividing the income estimate by an appropriate income rate or by multiplying the income estimate by an appropriate factor. The rate or factor selected represents the relationship between income and value observed in the market and is derived through comparable sales analysis. The Net Operating Income utilized within the Direct Capitalization method was based upon the estimates of the Year One Gross Rental Income, less vacancy and collection loss, fixed and variable operating expenses, as well as the estimated reserves. The derivation of an Overall Rate via derivation from comparable sales is the preferred technique of deriving a capitalization rate and requires that sufficient recent sales information on comparable properties is available. The comparable properties used should reflect risk, income and expenses, location and physical characteristics similar to that of the subject properties. In Direct Capitalization Method, no precise allocation is made between the return on and return of capital because this method does not simulate investor assumptions and forecasts concerning holding periods, income patterns or value changes in the original investment. Under this capitalization method a satisfactory rate of return for the investor and recapture of the capital invested is considered implicit within the rate used due to the fact that it is derived from similar investment properties. Based on the preceding analysis and taking into account the age, condition, location and rates of return required by investors purchasing this type of properties, as well as the net operating income ratio and gross income multiplier of comparable sales, a "going -in" capitalization rate of 11.0% at Properties Two, Three, Four, Five and Seven which are four-piex properties; 12.0% at Properties One and Six which are operated as rental apartment facilities; and 13.0% at Property Eight which is operated as a rooming house would reflect investor expectations within the subject competitive market. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 i Coconut Grove, Florida 33133 THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Direct Capitalization Method - Continued Based on the estimated Net Operating Income and the above capitalization rate, the Market Value of the subject properties utilizing the Direct Capitalization Method was as follows: Net Operating Income / Overall Rate = Value Estimate Property 1: $48,075 NOI / .12 = $400,625 Market Value of the Fee Simple Interest in Property 1 in "as is" Condition (Rounded) $400,600 Property 2: $13,470 NOI / .11 = $122,455 Market Value of the Fee Simple Interest in Property 2 in "as is" Condition (Rounded) $122,500 Property 3: $13,470 NOI / .11 = $122,455 Market Value of the Fee Simple Interest in Property 3 in "as is" Condition (Rounded) $122,500 Property 4: $13,380 NOI / .11 = $121,636 Market Value of the Fee Simple Interest in Property 4 in "as is" Condition (Rounded) Property 5: $13,460 NOI / .11 = Market Value of the Fee Simple Interest in Property 5 in "as is" Condition (Rounded) Property 6: $43,250 NOI / .12 = Market Value of the Fee Simple Interest in Property 6 in "as is" Condition (Rounded) $121,600 $122,364 $122,400 $360,417 $360,400 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 c•1 THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Direct CapitaIization Method - Continued Property 7: $11,360 NOI / .11 = $103,273 Market Value of the Fee Simple Interest in Property 7 in "as is" Condition (Rounded) $103,300 Property 8: $18,730 NOI /.13 = $144,077 Market Value of the Fee Simple Interest in Property 8 in "as is" Condition (Rounded) $144,100 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 THE SALES COMPARISON APPROACH INTRODUCTION The Sales Comparison Approach to Value is based on the principle of substitution; that is, when a property is replaceable in the market, its value tends to be set at the cost of acquiring an equally desirable substitute property assuming no costly delay in making the substitution. The Sales Comparison Approach to Value is based on a comparison between recently sold similar properties in the subject neighborhood and the subject properties. These comparable sales are then adjusted for the differences between them and the subject • properties, utilizing the Potential Gross Income Multiplier and price/SF (for the smaller four-plex and rooming house facilities) and price/unit (for the larger rental apartment buildings) methods of comparison, • a, J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 ' Coconut Grove, Florida 33133 - 55 - THE SALES COMPARISON APPROACH -- Continued -- Comparable Sale Number One Address: 1601 N.W. 62nd Street, Miami, Florida Legal Description: Lots 2, 3, 4 and 5, Block 6, East Liberty City Section A, as recorded in Plat Book 39, Page 19 of the Public Records of Miami -Dade County, Florida Grantee: GND Property Management, Inc. Grantor: Dalea Apartment, Inc. O.R. Book/Page: 19451/1628 Total Number of Units: 28 Adjusted Building Area: 10,428 SF Building Type: 2-story Site Size: 13,600 SF Zoning: R-3 Medium Density Multi -Family Residential District Year Built: 1953 Condition: Average Land -to -Building Ratio: 1.30:1 Date of Sale: January 5, 2001 Sale Price: $320,000 Financing: $72,000 purchase money mortgage at 10% for fifteen years Cash Equivalent Sale Price: $320,000 Cash Equivalent Sale Price/SF: $30.69 J.B. ALHALE & ASSOCIATES, INC, Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 THE SALES COMPARISON APPROACH Comparable Sale Number One (Continued) Cash Equivalent Sale Price/Unit: $11,400 Potential Gross Income Multiplier: 2.93 SALE PRICE PER UNIT TYPE Unit Indicated Type - .Sale BR -BA Price/Unit 28 x 1-1 $11,400 -- Continued -- J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 57 - THE SALES COMPARISON APPROACH Comparable Sate Number Two Address: 1575 N.W. 59th Street, Miami, Florida -- Continued -- Legal Description: Lots 25 and 26, Block 13, Orange Heights, as recorded in Plat Book 14, Page 62 of the Public Records of Miami -Dade County, Florida Grantee: Willie Bryant Grantor: Leonzie Jones O.R. Book/Page: 19380/1780 Total Number of Units: 11 Adjusted Building Area: 5,950 SF Building Type: 2-story Site Size: 10,600 SF Zoning: R-3 Medium Density Multi -Family Residential District Year Built: 1962 Condition: Average Land -to -Building Ratio: 1.78:1 Date of Sale: November 14, 2000 Sale Price: $98,500 Financing: Cash to the seller Cash Equivalent Sale Price: $98,500 Cash Equivalent Sale Price/SF: $16.55 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 THE SALES COMPARISON APPROACH Comparable Sale Number Two (Cpntinued) Cash Equivalent Sale Price/Unit: $9,000 Potential Gross Income Multiplier: 2.59 SALE PRICE PER UNIT TYPE Unit Indicated Type Sale BR -BA Price/Unit 2 x Efficiency $7,800 9 x 1-1 $9,200 -- Continued -- LB. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 312I Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 59 - THE SALES COMPARISON APPROACH Comparable Sale Number Three Address: Legal Description: Grantee: Grantor: O.R. Book/Page: Total Number of Units: -- Continued -- 1251 N.W. 59th Street, Miami, Florida Lots 23, Block 6, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida John and Gwendolyn Johnson Heavenly Properties, Inc. 19405/197 4 Adjusted Building Area: 2,779 SF Building Type: Site Size: Zoning: Year Built: Condition: Land -to -Building Ratio: Date of Sale: Sale Price: Financing: Cash Equivalent Sale Price: Cash Equivalent Sale Price/SF: 2-story 5,300 SF R-3 Medium Density Multi -Family Residential District 1965 Average 1.91:1 December 8, 2000 $115,000 Cash to the seller $115,000 $41.38 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 THE SALES COMPARISON APPROACH Comparable Sale Number Three (Continued) Cash Equivalent Sale PricelUnit: $28,800 Potential Gross Income Multiplier: 5.32 SALE PRICE PER UNIT TYPE Unit Indicated Type Sale BR -BA Price/Unit 4 x 2-1 $28,$00 -- Continued -- J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 o Coconut Grove, Florida 33133 - 61 - THE SALES COMPARISON APPROACH Cop pArable Sale Number Four Address: 1251 N.W. 61st Street, Miami, Florida Legal Description: -- Continued -- Lot 34, Block 2, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Grantee: CardenaI Coleman, Sr. Grantor: Gateway Real Estate, Inc. O.R. Book/Page: 19346/126 Total Number of Units: 4 Adjusted Building Area: 2,781 SF Building Type: 2-story Site Size: 5,300 SF Zoning: R-3 Medium Density Multi -Family Residential District Year Built: 1964 Condition: Average Land -to -Building Ratio: 1.91:1 Date of Sale: October 18, 2000 Sale Price: $118,000 Financing: Cash to the seller Cash Equivalent Sale Price: $118,000 Cash Equivalent Sale Price/SF: $42.43 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 f Coconut Grove, Florida 33133 TIE SALES COMPARISON APPROACH Comparable Sale Number Four (Continued) Cash Equivalent Sale Price/Unit: $29,500 Potential Gross Income Multiplier: 5,99 SALE PRICE PER UNIT TYPE Unit Indicated_ Type Sale BR -BA Price/Unit 4 x 2-1 $29,500 -- Continued -- J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 63 - THE SALES COMPARISON APPROACH -- Continued — Comparable Sale Number Five. Address: 6301 N.W. 17th Avenue, Miami, Florida Legal Description: Lot 3, less the southern five feet for street, Jenkins Addition to Liberty City, as recorded in Plat Book 39, Page 10 of the Public Records of Miami -Dade County, Florida Grantee: Harvell CastIeberr Grantor: Rogers Jones, Jr. O.R. Book/Page: 19206/4422 Total Number of Units: 4 Adjusted Building Area: 2,003 SF Building Type: 2-story Site Size: 3,600 SF Zoning: R-3 Medium Density Multi -Family Residential District Year Built: 1942 Condition: Average Land -to -Building Ratio: 1.80:1 Date of Sale: Sale Price: Financing: Cash Equivalent Sale Price: June 26, 2000 $90,000 - Cash to the seller $90,000 Cash Equivalent Sale Price/SF: $44.93 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 THE SALES COMPARISON APPROACH Comparable Sale Number Five (Continued) Cash Equivalent Sale Price/Unit: $22,500 Potential Gross Income Multiplier: 4.69 SALE PRICE PER UNIT TYPE Unit . • Indicated Type Sale BR -BA PriceLUnit 4 x 2-1 $22,500 -- Continued — J.B. ALHALE & ASSOCIATES, INC, Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 65 -