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Home My WebLink Aboutexhibits 8Ms. Laura Billberry May 23, 2001 Page Three PROPERTY TWO - 1400 N.W. 61ST STREET (MHZ-92) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION NINETY SEVEN FIVE HUNDRED THOUSAND DOLLARS ($97,500) PROPERTY THREE - 1425 N.W. 60TH STREET (MHZ-95) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION TWO HUNDRED SEVENTY THOUSAND DOLLARS ($270,000) PROPERTY FOUR - 1435 N.W. 60TH STREET (MHZ-96) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED SEVENTY FIVE THOUSAND DOLLARS ($175,000) PROPERTY FIVE - 1520 N.W. 61ST STREET (MHZ-106) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION TWO HUNDRED EIGHTY FIVE THOUSAND DOLLARS ($285,000) PROPERTY SIX - 1519 N.W. 60TH STREET (MHZ-109) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY ONE THOUSAND DOLLARS ($81,000) PROPERTY SEVEN - 1341 N.W. 61ST STREET (MHZ-34) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY FIVE THOUSAND DOLLARS ($85,000) PROPERTY EIGHT - 1371 N.W. b1ST STREET (MHZ-36) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY THOUSAND DOLLARS ($80,000) PROPERTY NINE - 1250 N.W. 60TH STREET (MHZ-178) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY THOUSAND DOLLARS ($80,000) PROPERTY TEN - 1600 N.W. 59TH STREET (MHZ-269) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY FIVE THOUSAND DOLLARS ($85,000) J.B. ALHALE 8 ASSOCIATES, INC. REAL ESTATE APPRAISERS AND CONSULTANTS Ms. Laura Billbeny May 23, 2001 Page Four PROPERTY ELEVEN - 1256 N.W. 58TH TERRACE AND 1255 N.W. 58th STREET (MHZ-357) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION FOUR HUNDRED Piny THOUSAND DOLLARS ($450,000) PROPERTY TWELVE - 1238 N.W. 58TH TERRACE (MHZ-358 MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED FORTY TWO THOUSAND FIVE HUNDRED DOLLARS ($142,500) Sincerely, Jozef Alhale, MAI State Certified General Appraiser License No. RZ 0001557 101-03-12.apt J.B. ALHALE 8t ASSOCIATES, INC. REAL ESTATE APPRAISERS AND CONSULTANTS TABLE OF CONTENTS PAGE NO. SUMMARY OF SALIENT FACTS AND CONCLUSIONS 1-9 PHOTOGRAPHS OF SUBJECT PROPERTY 10-31 PURPOSE/FUNCTION OF THE APPRAISAL 32 SCOPE OF THE APPRAISAL 32 PROPERTY RIGHTS APPRAISED 32 DATE OF VALUATION..... 32 STATEMENT OF OWNERSHIP AND HISTORY 33 ESTIMATED MARKETING PERIOD 33 DEFINITION OF MARKET VALUE.. 33-34 NEIGHBORHOOD ANALYSIS 34 DESCRIPTION OF THE SITES 34-35 UTILITIES 35 FLOOD ZONE 35 ZONING 35-36 ASSESSMENT AND REAL ESTATE TAXES 36 MULTI -FAMILY RESIDENTIAL MARKET OVERVIEW 37-42 THE VALUATION PROCESS 43 THE INCOME CAPITALIZATION APPROACH 44-69 THE SALES COMPARISON APPROACH 70-89 RECONCILIATION AND FINAL VALUE ESTIMATE 90-92 CONTINGENT AND LIMITING CONDITIONS 93-94 CERTIFICATION 95 ADDENDA 96 LETTER OF ENGAGEMENT 97 CONTINUING APPRAISAL EDUCATION (Jozef Alhale, MAI) 98 QUALIFICATIONS (Jozef Alhale, MAI) 99 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: Property 1 - Southeast corner of N.W. 61st Street and N.W. 15th Avenue, Miami, Florida Property 2 - Southwest corner of N.W. 61st Street and N.W. 14th Avenue, Miami, Florida Property 3 - 108 feet west of the northwest corner of N.W. 60th Street and N.W. 14th Avenue, Miami, Florida Property 4 - 300 feet east of the northeast corner of N.W. 60th Street and N.W. 15th Avenue, Miami, Florida Property 5 - 100 feet west of the southwest corner of N.W. 61st Street and N.W. 15th Avenue, Miami, Florida Property 6 - 100 feet west of the northwest corner of N.W. 60th Street and N.W. 15th Avenue, Miami, Florida Property 7 - 350 feet east of the northeast corner of N.W. 61st Street and N.W. 14th Avenue, Miami, Florida Property 8 - 100 feet east of the northeast corner of N.W. 61st Street and N.W. 14th Avenue, Miami, Florida Property 9 - 250 feet east of the southeast corner of N.W. 60th Street and N.W. 13th Avenue, Miami, Florida Property 10 - 300 feet west of the southwest corner of N.W. 59th Street and N.W. 15th Avenue, Miami, Florida Property 11 - 200 feet east of the southeast corner of N.W. 58th Terrace and N.W. 13th Avenue, Miami, Florida Property 12 - 223 feet west of the southwest corner of N.W. 58th Terrace and N.W. 12th Avenue, Miami, Florida Address: Property 1 - 6091 N.W. 15th Avenue, Miami, Florida Property 2 - 1400 N.W. 61st Street, Miami, Florida Property 3 - 1425 N.W. 60th Street, Miami, Florida Property 4 - 1435 N.W. 60th Street, Miami, Florida Property 5 - 1520 N.W. blst Street, Miami, Florida Property 6 - 1519 N.W. 60th Street, Miami, Florida Property 7 - 1341 N.W. 61st Street, Miami, Florida Property 8 - 1371 N.W. 61st Street, Miami, Florida Property 9 - 1250 N.W. 60th Street, Miami, Florida Property 10 - 1600 N.W. 59th Street, Miami, Florida Property 11 - 1256 N.W. 58th Terrace and 1255 N.W. 58th Street, Miami, Florida Property 12 - 1238 N.W. 58th Terrace, Miami, Florida J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 1 - SUMMARY OF SALIENT FACTS AND CONCLUSIONS -- Continued -- Property Code: Property 1 - MHZ-82 Property 2 - MHZ-92 Property 3 - MHZ-95 Property 4 - MHZ-96 Property 5 - MHZ-106 Property 6 - MHZ-109 Property 7 - MHZ-34 Property 8 - MHZ-36 Property 9 - MHZ-178 Property 10 - MHZ-269 Property 11 - MHZ-357 Property 12 - MHZ-358 Folio No: Property 1 - 01-3114-035-1450 Property 2 - 01-3114-035-1550 Property 3 - 01-3114-035-1580 Property 4 - 01-3114-035-1610 Property 5 - 01-3114-035-2250 Property 6 - 01-3114-035-2220 Property 7 - 01-3114-043-0190 Property 8 - 01-3114-043-0240 Property 9 - 01-3114-043-0980 Property 10 - 01-3114-035-2730 Property 11 - 01-3114-043-1800 Property 12 - 01-3114-043-1810 Owner of Record: Property 1 - ZBG, Inc. 1497 N.W. 7th Street Miami, Florida 33125-3640 Property 2 - Coley and Inell Williams 1742 N.W. 49th Street Miami, Florida 33142-4072 Property 3 - Neal A. Smith 3198 N.W. 169th Terrace Miami, Florida 33056-4322 Property 4 - Coley and Inell Williams 1742 N.W. 49th Street Miami, Florida 33142-4072 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 -2- SUMMARY OF SALIENT FACTS AND CONCLUSIONS Owner of Record (Continued): Legal Description: Property 5 - Property 6 - Property 7 - Property 8 - Property 9 - Property 10 - Property 11 - Property 12 - By Properties, Inc. P.O. Box 630576 Miami, Florida 33163 Coley and Inell Williams 1742 N.W. 49th Street Miami, Florida 33142-4072 Coley and Ine11 Williams 1742 N.W. 49th Street Miami, Florida 33142-4072 Joseph and Barbara Wiggins 20230 N.W. 9th Drive Pembroke Pines, Florida 33029 59th Street Corporation 1497 N.W. 7th Street Miami, Florida 33125-3640 G.M. Schweitzer and S. Zimbleman 1497 N.W. 7th Street Miami, Florida 33125-3640 Orchard Villas Apartments, Inc. 2840 S.W. 3rd Avenue Miami, Florida 33129-2317 Jerry H. Evans and Scott R. Evans 845 North Oak Court Chandler, Arizona 85226 -- Continued -- Property 1 - Lots 1 and 2, Block 9, Orange Heights, as recorded in Plat Book 14, Page 62 of the Public Records of Miami -Dade County, Florida Property 2 - Lot 13, Block 9, Orange Heights, as recorded in Plat Book 14, Page 62 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 Legal Description (Continued): -- Continued -- Property 3 - Lots 16 to 18, Block 9, Orange Heights, as recorded in Plat Book 14, Page 62 of the Public Records of Miami -Dade County, Florida Property 4 - Lots 19 and 20, Block 9, Orange Heights, as recorded in Plat Book 14, Page 62 of the Public Records of Miami -Dade County, Florida Property 5 - Lots 21 and 22, Block 12, Orange Heights, as recorded in Plat Book 14, Page 62 of the Public Records of Miami -Dade County, Florida Property 6 - Lot 16, Block 12, Orange Heights, as recorded in Plat Book 14, Page 62 of the Public Records of Miami -Dade County, Florida Property 7 - Lot 32, Block 1, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 8 - Lot 37, Block 1, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 9 - Lot 6, Block 6, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 10 - Lot 25, Block 14, Orange Heights, as recorded in Plat Book 14, Page 62 of the Public Records of Miami -Dade County, Florida Property 11 - Lots 5, 6, 23 and 24, Block 10, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Property 12 - Lots 7 and 8, Block 10, 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 -4- Air SUMMARY OF SALIENT FACTS AND CONCLUSIONS -- Continued -- Site Area: Property 1 - 10,600 SF Property 2 - 6,119 SF Property 3 - 15,900 SF Property 4 - 10,600 SF Property 5 - 10,600 SF Property 6 - 5,300 SF Property 7 - 5,300 SF Property 8 - 5,300 SF Property 9 - 5,300 SF Property 10 - 5,300 SF Property 11 - 21,200 SF Property 12 - 10,600 SF Improvements: Property One consists of a U-shaped two-story 15-unit CBS apartment building which 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. Property Two consists of a U-shaped two-story 6-unit CBS apartment building which was built in 1959, and contains an adjusted building area of 3,357 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 3,632 SF and the unit mix is comprised of four two bedroom -one bathroom and two three bedroom -two 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. Property Three consists of a U-shaped two-story 22-unit CBS apartment building which was built in 1958, and contains an adjusted building area of 9,484 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 9,550 SF and the unit mix is comprised of twenty-two one bedroom - one bathroom units. The unit features include window/wall-mounted A/C units and on -site parking. There are reportedly four vacant units; and there were signs of water leak from the second floor to the first floor apartment (Apartment No. 5) at the time of inspection. 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 — Improvements (Continued): Property Four consists of an L-shaped two-story 12-unit CBS apartment building which was built in 1958, and contains an adjusted building area of 5,546 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 5,700 SF and the unit mix is comprised of ten one bedroom -one bathroom and two 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. Property Five consists of an L-shaped three-story 18-unit CBS apartment building which 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 bedroom -one 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. Property Six consists of a rectangular two-story 4-unit CBS apartment building which was built in 1961, and contains an adjusted building area of 2,573 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 2,675 SF and the unit mix is comprised of three one bedroom -one bathroom and one three bedroom -two 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. Property Seven consists of a rectangular two-story 6-unit CBS apartment building which was built in 1957, and contains an adjusted building area of 3,409 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 3,500 SF and the unit mix is comprised of six two bedroom -one bathroom units. The unit features include window/wall-mounted A/C units and on -site parking. There are two vacant units -which require renovation before they can be rented. The owners are not planning to renovate, if the building is being purchased. 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 -- Improvements (Continued): Property Eight consists of a rectangular two-story 6-unit CBS apartment building which was built in 1958, and contains an adjusted building area of 2,604 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 2,700 SF and the unit mix is comprised of six 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. Property Nine consists of a rectangular two-story 6-unit CBS apartment building which was built in 1958, and contains an adjusted building area of 2,819 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 2,675 SF and the unit mix is comprised of six one 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. Property Ten consists of a rectangular two-story 4-unit CBS apartment building which was built in 1967, and contains an adjusted building area of 2,431 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 2,600 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. The property appears to be adequately maintained, with no signs of notable deferred maintenance. Property Eleven consists of two L-shaped three-story 18-unit CBS apartment buildings which were built in 1959, and contain 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. There was one vacant unit which needed to be prepared for tenancy at the time of inspection. 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 -- Improvements (Continued): Property Twelve consists of a U-shaped two-story 12-unit CBS apartment building which was built in 1964, and contains an adjusted building area of 5,954 SF, as per the Public Records of Miami -Dade County, Florida. The building contains a Gross Building Area of 6,290 SF and the unit mix is comprised of twelve one 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. 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: Existing Use: Highest and Best Use: R-3 Multi -Family Medium Density Residential District Rental apartment buildings 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 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: Fee Simple Interest Date of Appraisal, Inspection and Valuation: April 23, 2001 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 8 - SUMMARY OF SALIENT FACTS AND CONCLUSIONS -- Continued -- MARKET VALUE ESTIMATES IN "AS IS" CONDITIQN: Income Sales Comparison Reconciled Approach Approach Value Property 1 $211,000 $200,000 $205,000 Property 2 $94,200 $100,000 $97,500 Property 3 $288,500 $250,000 $270,000 Property 4 $189,000 $165,000 $175,000 Property 5 $332,750 $240,000 $285,000 Property 6 $84,000 $77,500 $81,000 Property 7 $80,400 $90,000 $85,000 Property 8 $84,200 $75,000 $80,000 Property 9 $81,700 $75,000 $80,000 Property 10 $94,300 $74,000 $85,000 Property 11 $429,100 $475,000 $450,000 Property 12 $144,250 $140,000 $142,500 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 9 - View 1.3t f'rl:s rtv 8 (MHZ-36: 1371 N.W. 61st Street, Miami) - April 23, 2001 View of 8 (MHZ-36: 1.371 N.W. 61st Street, Miami) - April 23, 2001 I. S, ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 View of Property 8 (MHZ-36; ':.' `i . W. 61st Street, Miami) - April 23, 2001 View of Property 8 (MHZ-36; W 61st Street, Miami) - April 23, 2001 J.B.ASSOCIATES, INC:. Real Est _•• Appraisers and Consultants 3121 Commodore Hai , -.Hite 200 • Coconut Grove. Honda 33133 PURPOSE/FUNCTION OF THE APPRAISAL The purpose of this appraisal report is 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 April 23, 2001. The function of this appraisal report is to assist the client (City of Miami) in executive decision making and potential purchase of the subject properties. SCOPE OF THE APPRAISAL 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 April 23, 2001. 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. The subject properties were built between 1957 and 1967, and reflect legal non -conforming structures. The Cost Approach to Value was not applicable in the valuation of the subject properties, and have not been utilized in this report. The data and information used in developing our findings, projections and valuation estimates have been derived from published information, direct interviews, analysis of similar properties and other sources which were considered appropriate, as of the date of this report. 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 includes all the rights that may be lawfully held under a fee simple estate. Fee simple is defined in The Dictionary of Real Estate Appraisal. 1984 Edition, which was sponsored by the American Institute of Real Estate Appraisers as follows: Absolute ownership unencumbered by any other interest or estate; subject only to the limitations of eminent domain, escheat, police power and taxation. The subject properties are rented on a month -to -month basis. DATE OF VALUATION April 23, 2001. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 1 Coconut Grove, Florida 33133 -3?- STATEMENT OF OWNERSHIP AND HISTORY Refer to the summary of ownership. Property Three was purchased for $145,000 on September 1, 1996 from Leonzie and Flonnie Mae Jones, as recorded in Book 17355, Page 4571 of the Official Public Records of Miami -Dade County, Florida. Property Five was purchased for $195,000 on March 2, 1999 from 4190 N.W. 32nd Avenue Properties Trust, Inc., as recorded in Book 18516, Page 4881 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. Property Twelve is listed for sale at $296,000 with an adjacent 12-unit apartment building located at 1245 N.W. 58th Street. 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. DEFINITION OF MARKET VALUE Market Value is defined in The Appraisal of Real Estate, Tenth Edition, by the Appraisal Institute as follows: The most probable price, as of a specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeably, and for self-interest and assuming that neither is under undue duress. Fundamental assumptions and conditions presumed in this definition are: 1. 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 terms. 5. Specified financing, if any, may be the financing,actually in place or on terms generally available for the property type in its locale on the effective appraisal date. J.S. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33t33 - 33 - DEFINITION OF MARKET VALUE -- Continued -- 6. 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 follows: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: a. buyer and seller are typically motivated; b. both parties are well informed or well advised, and acting in what they consider their own best interests; c. a reasonable time is allowed for exposure in the open market; d. payment is made in terms of cash in U.S. dollars or in terms of financial arrangements comparable thereto; and e. the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale. NEIGHBORHOOD ANALYSIS The subject properties are located between N.W. 12th Avenue and N.W. 16th Avenue, and between N.W. 58th Street and N.W. 61st Street, in the City of Miami. The major roadways serving the area include Interstate 95, N.W. 17th Avenue and N.W. 62nd Street. The subject neighborhood is a compatible mixture of duplexes, rental apartments and vacant lots, as well as service establishments situated along 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 immediate area. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 34 - DESCRIPTION OF THE SITES -- Continued -- 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. 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 The subject properties 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: 5,000 SF Minimum Lot Width: 50 feet Maximum Density: 65 units/acre Floor Area Ratio: .75 times the gross lot area Building Footprint: .40 times the gross lot area Green Space: .15 times the gross lot area J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 35 - ZONING -- Continued -- Maximum Height Limitation: 50 feet from the flood level or average sidewalk elevation, whichever is higher Setback: 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 Off-street Parking: One parking space/300 SF of office area; 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. 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 1 is assessed at $101,319, with resultant real estate taxes of $3,974.52. Property 2 is assessed at $87,610, with resultant real estate taxes of $2,999.10. Property 3 is assessed at $144,243, with resultant real estate taxes of $5,599.94. Property 4 is assessed at $63,882, with resultant real estate taxes of $2,649.35. Property 5 is assessed at $186,840, with resultant real estate taxes of $6,466.43. The real estate taxes for 1999 are reported to be delinquent. Property 6 is assessed at $64,936, with resultant real estate taxes of $2,078.21. Property 7 is assessed at $39,779, with resultant real estate taxes of $1,539.32. Property 8 is assessed at $79,221, with resultant real estate taxes of $2,619.38. Property 9 is assessed at $84,467, with resultant real estate taxes of $2,763.05. Property 10 is assessed at $81,237, with resultant real estate taxes of $2,524.58. Property 11 is assessed at $252,925, with resultant real estate taxes of $8,276.10. Property 12 is assessed at $82,890, with resultant real estate taxes of $3,197.25. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 36 - 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 - 37 - MULTI -FAMILY RESIDENTIAL MARKET OVERVIEW -- Continued -- Ren 1 A a t ar Conti tied 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 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 38 - MULTI-FAM1LY 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 units were under construction. New apartment starts through June 2000 were 1,583 units, 9.5 times 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. Rea! Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 39 - 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 the 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 limited. 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 - 40 - 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 -41 - 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 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 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 lst 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 lst 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 - 42 - THE 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. In order to estimate the Market Value of the Fee Simple Interest in the subject properties in their current "as is" condition, as of April 23, 2001, the Income Capitalization and Sales Comparison Approaches to Value has been utilized. 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 upon a comparison between recently sold rental apartments in the subject neighborhood and the subject properties, utilizing the price/unit and Gross Income Multiplier 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 incom€' flow), The subject properties were built between 1957 and 1967, and reflect legal non- conforming structures. The Cost Approach to Value was not applicable in the valuation of the subject properties, and have not been utilized in this report. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 43 - 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 200 • Coconut Grove, Florida 33133 - 44 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued — Comparable Rental Apartment One 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 Rate 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 33133 - 45 - 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: Lease Terms: Occupancy: Comments: Unit Rental Type Rate Efficiency $250 1 BR-1 BATH $285-$300 Month -to -month 81.8% 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 - 46 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Comparable Rental Apartment Three 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 Type Rate 2 BR-1 BATH $400 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 5.99. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 i Coconut Grove, Florida 33133 - 47 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Comparable Rental Apartment Four Address: 1245 N.W. 58th Street Miami, Florida Type: 2-story rental apartment building Year Built: 1964 Condition: Average No. of Units: 24 Rental Rates: Unit Rental Tvne Rate Efficiency $250 1 BR-1 BATH $275 Lease Terms: Month -to -month Occupancy: 100% Comments: This 24-unit property (with 1238 N.W. 58th Terrace) is listed for sale at $295,000 or $12,300/unit, with an effective. Potential Gross Income Multiplier of 3.72, based on the reported income in 1999. 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 -- Comparable Rental Apartmegt 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 - 49 - 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 Typ Rate 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 bedroom -one 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 - 50 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- SUMMARY OF RENTAL RATES FOR RENTAL APARTMENTS Total Monthly Ads±lS Year Built/ No. of Unit Rent Occupancy Condition Utniti lypa Ham ) 1601 N.W. 62nd Street 100.0% 1953 28 1 / 1 Miami, Florida Average $325 $325 2) 1575 N.W. 59th Street Miami, Florida 81.8% 1962 9 Efficiency $250 $250 Average 2 1/1 $285 $300 3) 1251 N.W. 59th Street 100.0% 1965 Miami, Florida 4 2 / 1 $400 $400 Average 4) 1245 N.W. 58th Street 100.0% 1964 20 Efficiency $250 $250 Miami, Florida Average 4 1 / 1 $275 $275 5) 6091 N.W. 15th Avenue 95.0% 1957 8 1 / 1 Miami, Florida Average 6 2 / 1 $285 $225 $285 $285 1 3 / 2 $450 $450 6) 1520 N.W. 61st Street Miami, Florida 100.0% 1957 12 Average 6 1/1 2/1 $325 $325 $425 $425 Law HiCth Efficiency $250 $250 1 / 1 $225 $325 2 / 1 $285 $425 3 / 2 $450 $450 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 -51 - 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 properties, and to provide an indication of market rental rates and occupancy levels which would be applicable to the subject properties in a continued rental use. The unadjusted monthly rental rates within the competitive facilities were: $250 for efficiency apartments; $225 to $325 for one bedroom -one bathroom apartments; $285 to $425 for two bedroom -one bathroom apartments; and $450 for three bedroom -two bathroom apartments. 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. 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 Based on the size, condition and number of units which require rehabilitation prior to occupancy, we have estimated the vacancy and collection loss factor at 20% at Property 3 (four vacant units at the time of inspection) and Property 7 (two vacant units at the time of inspection; requires renovation work), and 8.33 % (an average of one month per year vacancy; tenant turn -over or collection loss at a stabilized operation) at the remaining subject properties. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 52 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- OPERATING EXPENSES The landlord is responsible for real estate taxes, insurance, management, common area electricity (if applicable), water and sewer (with the exception of the subject properties at 6091 N.W. 15th Avenue and 1341 N.W. 6lst Street); 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.13. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 53 - THE INCOME CAPITALIZATION APPROACH TO VALUE PROPERTY EIGHT (1371 N.W. 61st Street, Miami) Gross Income The Potential Gross Income was estimated at $21,600, with an Effective Gross Income of $19,800. Operating Expenses The actual real estate taxes are $2,619.38, with an assessment of $30.42/SF of building • area which is unusually higher than comparable properties. Based on an assessment of $15.00/SF (similar to the rest of the subject properties), the real estate taxes are estimated at $1,069.62 or $1,027 after a 4.0% discount for prompt payment. The insurance expense was estimated to be $1,700. 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 5.0% of the effective gross rental income or $990. The subject apartment units are individually metered for electricity. The expense for the common area electricity was estimated to be $340. The water and sewer expense was estimated to be $1,350. The gas expense was estimated to be none. The waste removal expense was estimated to be $900. The repairs, maintenance and contract services was estimated to be $1,650 (excluding reserves for replacement of short-lived items). Based on the size of the property, the legal and professional fees were estimated to be $750. The miscellaneous expenses were estimated to be $25/unit or $150. The landlord would be responsible for the replacement of short-lived items which were estimated to be $840. Refer to the facing page. Net Operating Income The total operating expenses were estimated to be $9,697 or $1,616/unit or 49.0% of the effective gross income. The net operating income before debt service was estimated to be $10,103 or $1,684/unit or 51.0% of the effective gross income. -- Continued -- J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 61- 1 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 and (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 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 1st quarter of 2000, with an average of 9.21 %. J.S. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 66 - 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 12.0% would reflect investor expectations within the subject competitive market. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 67 - THE INCOME CAPITALIZATION APPROACH TO VALUE -- Continued -- Direct Capitalization Method - Continued Property 7: $9,645 NOI / .12 = $80,375 Market Value of the Fee Simple Interest in Property 7 in "as is" Condition (Rounded) $80,400 Property 8: $10,103 NOI / .12 = $84,192 Market Value of the Fee Simple Interest in Property 8 in "as is" Condition (Rounded) $84,200 Property 9: $9,803 NOI / .12 = $81,692 Market Value of the Fee Simple Interest in Property 9 in "as is" Condition (Rounded) $81,700 Property 10: $11,316 NOI / .12 = $94,300 Market Value of the Fee Simple Interest in Property 10 in "as is" Condition (Rounded) $94,300 Property 11: $51,495 NOI / .12 = $429,125 Market Value of the Fee Simple Interest in Property 11 in "as is" Condition (Rounded) $429,100 Property 12: $17,310 NOI / .12 = $144,250 Market Value of the Fee Simple Interest in Property 12 in "as is" Condition (Rounded) $144,250 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 69 - 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 property, utilizing the price/unit and Potential- Gross Income Multiplier methods of comparison. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 70 - 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 -71 - 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 - 72 - THE SALES COMPARISON APPROACH -- Continued -- Comparable Sale Number Two Address: 1575 N.W. 59th Street, Miami, Florida 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 - 73 - THE SALES COMPARISON APPROACH Comparable Sale Number Two (C9ntinuedi 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 -- J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 74 - THE SALES COMPARISON APPROACH -- Continued -- Comparable Sale Number Three Address: 1251 N.W. 59th Street, Miami, Florida Legal Description: Lots 23, Block 6, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Grantee: John and Gwendolyn Johnson Grantor: Heavenly Properties, Inc. O.R. Book/Page: 19405/197 Total Number of Units: 4 Adjusted Building Area: 2,779 SF Building Type: 2-story Site Size: 5,300 SF Zoning: R-3 Medium Density Multi -Family Residential District Year Built: 1965 Condition: Average Land -to -Building Ratio: 1.91:1 Date of Sale: December 8, 2000 Sale Price: $115,000 Financing: Cash to the seller Cash Equivalent Sale Price: $115,000 Cash Equivalent Sale Price/SF: $41.38 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 75 - THE SALES COMPARISON APPROACH Comparable Sale Number Three (Continued) Cash Equivalent Sale Price/Unit: $28,800 Potential Gross Income Multiplier: 5.99 SALE PRICE PER UNIT TYPE Unit Indicated Type Sale BR -BA Price/Unit 4 x 2-1 $28,800 -- Continued -- J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 76 - THE SALES COMPARISON APPROACH -- Continued -- Comparable Sale Number Four Address: 1251 N.W. 61st Street, Miami, Florida Legal Description: 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: Cardenal 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 • Coconut Grove, Florida 33133 - 77 - THE 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 TYPJ 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 - 78 - THE SALES COMPARISON APPROACH -- Continued -- Comparable Sale Number Five Address: 6301 N.W. 17th Avenue, Miami, Florida Legal Description: Grantee: Grantor: Rogers Jones, Jr. O.R. Book/Page: 19206/4422 Total Number of Units: 4 Adjusted Building Area: 2,003 SF 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 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: Harvell Castleberr 2-story 3,600 SF R-3 Medium Density Multi -Family Residential District 1942 Average 1.80:1 June 26, 2000 $90,000 Cash to the seller $90,000 $44.93 J.S. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 o Coconut Grove, Florida 33133 - 79 - 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 Price/Unit 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 - 80 - THE SALES COMPARISON APPROACH — Continued -- Comparable Listing For Sale Number Six Address: 1259 N.W. 58th Terrace, Miami, Florida Legal Description: Lot 24, Block 7, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Owner: Home Equity Mortgage Corporation Total Number of Units: 6 Adjusted Building Area: 2,976 SF Building Type: 2-story Site Size: 5,300 SF Zoning: R-3 Medium Density Multi -Family Residential District Year Built: 1959 Condition: Average Land -to -Building Ratio: 1.78:1 Asking Price: $99,900 Asking Price/SF: $33.57 Asking Price/Unit: $16,700 Potential Gross Income Multiplier: 5.05 SALE PRICE PER UNIT TYPE Unit Indicated Type Sale BR -BA Price/Unit 6 x 1-1 $16,700 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 -81 - THE SALES COMPARISON APPROACH -- Continued — Comparable Listing For Sale Number Seven Address: Legal Description: 1245 N.W. 58th Terrace and 1238 N.W. 58th Street, Miami, Florida Lots 7, 8, 21 and 22, Block 10, Orchard Villa Extension, as recorded in Plat Book 17, Page 55 of the Public Records of Miami -Dade County, Florida Owner: Jerry Evans and Scott Evans Total Number of Units:- 24 Adjusted Building Area: 11,908 SF Building Type: 2-story Site Size: 21,200 SF Zoning: R-3 Medium Density Multi -Family Residential District Year Built: 1964 Condition: Average Land -to -Building Ratio: 1.78:1 Asking Price: $295,000 Asking Price/SF: $49.55 Asking Price/Unit: $12,300 Potential Gross Income Multiplier: 3.72 SALE PRICE PER UNIT TYPE Unit Indicated Type Sale BR -BA Price/Unit 4 x Efficiency $11,200 20 x 1-1 $12,500 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 82 - THE SALES COMPARISON APPROACH -- Continued -- SUMMARY OF 614JLT14AA6tLY RENTAL APARTMENT SALES FOR SUBJECT PROPERT114 Me E3415117 2 $ly say late Dake Lining Lista19 M Twa Three I'6 r UM sF1ii Ela Una Address 1101 N W, 1576 M.W. 1251 M.W. 1251 N.W. 1301 M.W. 62nd Street 59th Street 5991 Stre1l 6151 She* 171h Amino' 125TM.W. .4 1231 /1U1 MINN Miami Marna Miami Mew} f61hMT9 M. ♦t 123/ M.W. 5M11 Tames Mimi Building Type 2-51ory 2•Slary 2-Story 2•8l erY 2•61ory 2-1116ey 2-Story Stalkless Area (SF)(11 10,426 5.950 2,779 2,711 2,003 2.970 I1,l0/ Ste Area (11,) 13.100 10,600 5.300 5,300 5.600 5.300 21.200 Land•lo•9rr90Y1g Rails 1.30 1,76 1.41 1.01 1.40 1.76 1.7/ Density (UnaHAara) 69.7 45.2 32.9 32.9 41.4 41.3 49.3 Number of Un1a 21 1 i lAtil Ohm4 S 34 Enemy 2 1 SR In 26 4• 4 1IR/1,1161h _ / 20 2 M11 Calk . 21R/1.51aM 4 4 4 2 4R/21a6. 3SPA Ilit1 MAO%AaaNna or) 372 541 645 695 501 496 419 Year Cud 1953 1952 1961 1064 I1742 1959 1464 Condliol Average Average • MOW. Average Average Average Avenge Zoning C-1 71,3 . R 3 R 3 R 3 R•] R.3 Day of Mee 919r2001 11/1412000 12/5/2000 Kul 612000 6i26r2000 Lipid Wiled Cauideralion 8320,000 399,500 1115.000 :I 15,000 160,069 199,900 2295.000 Financing 572,000 Cash to Cash to Cosh 10 Cash lo PMM Ike Meyer Iha Behr Ins Seller the Seiler Limed Listed Caul Equivalent Sate PACs Cash E9ulvaMra sm. Now 130.66 $16.35 546.3e 342.43 5/4,43 533.57 324.77 Cash Equivalent Saki Price/ UM (Average) 511,400 59,000 126,600 129,506 522,500 316,100 512,300 Unadjusted Sate EfficiencyPrice/UMType 1 R/1llh 5/1,4a9 17,600 - . 2 aWt calk 3l,201 511.20a 28Rll.s math $21.10o 12f,s60 132,i00 $te, 06 112,101 2 MR/2 /a61 - - 3 Mil lath• 3 4R/2 Cato S320,006 194,500 1115.000 8118,000 890.000 S99,900 1298.000 • aroos Income Idisipfar 2.13 2.29 11.19 1.n 4.111 /.01 3.72 (I): AdJlRltd bolding arty as named b1 the Public RewrOe Of MlemfOsde County, Pkirtde. J.B. ALHALE & ASSOCIATES, INC. Rea[ Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 83 - THE SALES COMPARISON APPROACH -- Continued -- ANALYSIS OF COMPARABLE SALES The Sales Comparison Approach to Value is based upon a comparison between recently sold properties in the subject neighborhood and the subject properties. The comparable sales, as well as two listings have been analyzed on the basis of the Potential Gross Income Multiplier and sale price/unit units of comparison. The following discussion illustrates the basis for our adjustments in the comparable sales analysis. Financing The sales represent "arm's length" transactions with typical terms of purchase. The purchase money and conventional mortgages involved in the comparable sales were at market interest rates and terms at the time of sale, thereby requiring no adjustment for financing. Time of Sale The current listings, as well as the comparable apartment sales under analysis have occurred between June 2000 and January 2001, and reflect current market conditions in the subject area. Accordingly, no quantitative time adjustment was required. Age/Condition The comparable properties were built between 1942 and 1965, and are in average condition. The subject properties were built between 1957 and 1967, and are in average condition. The comparable sales were similar to the subject properties in terms of condition and appeal. Location Investors in this type of income producing property, such as rental apartment buildings, typically pay a sales price based upon certain investment criteria. In the analysis of the comparable sales, location is not considered as critical as the net income flow. The comparable sales are located within the same neighborhood, and were considered similar to the subject properties in terms of overall location. Unit Mix and Size The comparable rental apartment sales have been analyzed relative to their unit mix. The respective unit types command different rental rates and account for different portions of the income stream and therefore, have an affect on the purchase price associated with income generation potential. Investors purchasing income producing apartment facilities would typically pay more for those buildings which contain greater numbers of two - bedroom and three -bedroom units, as compared to the smaller efficiency and one - bedroom units. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 84 - THE SALES COMPARISON APPROACH -- Continued -- Potential Gross Income Multiplier Method - Continued Property 6: $21,000 PGI x 3.75 = $78,750 Market Value of the Fee Simple Interest in Property 6 in "as is" Condition (Rounded) $78,800 Property 7: $25,200 PGI x 3.25 = $81,900 Market Value of the Fee Simple Interest in Property 7 in "as is" Condition (Rounded) $81,900 Property 8: $21,600 PGI x 3.75 = $81,000 Market Value of the Fee Simple Interest in Property 8 in "as is" Condition (Rounded) $81,Q00 Property 9: $21,600 PGI x 3.75 = $81,000 Market Value of the Fee Simple Interest in Property 9 in "as is" Condition (Rounded) $81,000 Property 10: $20,400 PGI x 3.75 = $76,500 Market Value of the Fee Simple Interest in Property 10 in "as is" Condition (Rounded) $76,500 Property 11: $126,000 PGI x 3.75 = $472,500 Market Value of the Fee Simple Interest in Property 11 in "as is" Condition (Rounded) $472,500 Property 12: $39,600 PGI x 3.75 = $148,500 Market Value of the Fee Simple Interest in Property 12 in "as is" Condition (Rounded) $14$,500 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 86 - THE SALES COMPARISON APPROACH Price/Unit Method - Continued Property 6: $11,000 x 3 + $40,000 x 1 = $73,000 Market Value of the Fee Simple Interest in Property 6 in "as is" Condition (Rounded) $73,004 Property 7: $17,500 x 6 = $105,000 Market Value of the Fee Simple Interest in Property 7 in "as is" Condition (Rounded) $66,000 Property 8: $11,000 x 6 = $66,000 Market Value of the Fee Simple Interest in Property 8 in "as is" Condition (Rounded) $66,000 Property 9: $11,000 x 6 = $66,000 Market Value of the Fee Simple Interest in Property 9 in "as is" Condition (Rounded) $66,000 Property 10: $17,500 x 4 = $70,000 Market Value of the Fee Simple Interest in Property 10 in "as is" Condition (Rounded) $70,000 Property 11: $9,000 x 2 + $11,000 x 21 + $17,500 x 13 = $476,500 Market Value of the Fee Simple Interest in Property 11 in "as is" Condition (Rounded) $476,500 Property 12: $11, 000 x 12 = $132,000 Market Value of the Fee Simple Interest in Property 12 in "as is" Condition (Rounded) $132,000 -- Continued -- J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 88- THE SALES COMPARISON APPROACH RECONCILIATION Property 1 Property 2 Property 3 Property 4 Property 5 Property 6 Property 7 Property 8 Property 9 Property 10 Property 11 Property 12 Value Via Value Via PGIM Method Price/Unit $178,200 $220,500 $103,500 $99,000 $278,900 $220,000 $182,250 $145,000 $283,500 $237,000 $78,800 $73,000 $81,900 $105,000 $81,000 $66,000 $81,000 $66,000 $76,500 $70,000 $472,500 $476,500 $148,500 $132,000 Reconciled Value $220,000 $100,000 $250,000 $165,000 $260,000 $77,500 $90, 000 $75,000 $75,000 $74,000 $475,000 $140,000 J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 89 - RECONCILIATION AND FINAL VALUE EST/IA T VL U EST/MATE Property 1 $211, 000 $200,000 $205,000 2 $94,200 $100,000 Property 3 $97,500 $288,500 $250,000 Property 4 $270,000 $189,000 $165,000 $175,000 Reconciled Income AP -moth h&c Property 5 $332,750 $240,000 Property 6 $285,000 $84,000 $77,500 $81,000 Sales Comparison inp2Qach Property 11 $429,100 $475 °00 $450, 0oa Property 12 $144,250 $140,000 $14 In order to estimate the Market Value of the Fee2,500 in their current "as is" Simple Interest in the subject properties Sales Comparison Approaches as of April 23, 2001, the Income Capitalization P to Value has been utilized. P s and The Income Approach to Value is characteristics sd within a typically based upon the projected income and basedmethod. The analysis of the subject rated Cash Flow model or direct capitalization expense meth the income and hexpenseJ properties in a continued rental a a n Income onthe characteristics applicable to P rtment use is income producing properties are generally purchased on the basis of their subject ipateYnet The Direct Capitalization Method converts an estimate of a , expectancy into an indication of value either bytheir anticipated net expectancy income rate orindication bysingle year's income The rate or factor selected represents he dividing the income opiate can multiplying g the income estimate by an appropriate factor. in the market. relationship between income and value observed T Property 7 $80,400 $90,000 $85 Property 8 '� $84,200 $75,000 Property 9 $80,pQ0 $81,700 $75,000 Pro ert $80, 000 P y 10 $94,300 $74,Q00 $85,000 J.B. ALHALE & ASSOCIA Real Estate Appraisers and C nsulta is 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 90 - RECONCILIATION AND FINAL VALUE ESTIMATE -- Continued -- The Sales Comparison Approach to Value is based upon a comparison between recently sold rental apartments in the subject neighborhood and the subject properties, utilizing the price/unit and Gross Income Multiplier 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 improvementsto 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). The subject properties were built between 1957 and 1967, and reflect legal non- conforming structures. The Cost Approach to Value was not applicable in the valuation of the subject properties, and have not been utilized in this report. 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 April 23, 2001, was: PROPERTY ONE - 6091 N.W. 15TH AVENUE (MHZ-82) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION TWO HUNDRED FIVE THOUSAND DOLLARS ($205, 000) PROPERTY TWO - 1400 N.W. 61ST STREET (MHZ-92) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION NINETY SEVEN FIVE HUNDRED THOUSAND DOLLARS ($97,500) PROPERTY THREE - 1425 N.W. 60TH STREET (MHZ-95) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION TWO HUNDRED SEVENTY THOUSAND DOLLARS ($270,000) PROPERTY FOUR - 1435 N.W. 60TH STREET (MHZ-96) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED SEVENTY FIVE THOUSAND DOLLARS ($175,000) J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 91 - RECONCILIATION AND FINAL VALUE ESTIMATE -- Continued — PROPERTY FIVE - 1520 N.W. 61ST STREET (MHZ-106) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION TWO HUNDRED EIGHTY FIVE THOUSAND DOLLARS ($285,000) PROPERTY SIX - 1519 N.W. 60TH STREET (M Z-109) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY ONE THOUSAND DOLLARS ($81,000) PROPERTY SEVEN - 1341 N.W. 61ST STREET (MIIZ-34) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY FIVE THOUSAND DOLLARS ($85,000) PROPERTY EIGHT - 1371 N.W. 61ST STREET (MHZ-36) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY THOUSAND DOLLARS ($80,000) PROPERTY NINE - 1250 N.W. 60TH STREET (MHZ-178) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY THOUSAND DOLLARS ($80,000) PROPERTY TEN - 1600 N.W. 59TH STREET (MHZ-269) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION EIGHTY FIVE THOUSAND DOLLARS ($85,000) PROPERTY ELEVEN - 1256 N.W. 58TH TERRACE AND 1255 N.W. 58th STREET (MHZ-357) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION FOUR HUNDRED FIFTY THOUSAND DOLLARS ($450,000) PROPERTY TWELVE - 1238 N.W. 58TH TERRACE (MHZ-358) MARKET VALUE OF FEE SIMPLE INTEREST IN "AS IS" CONDITION ONE HUNDRED FORTY TWO THOUSAND FIVE HUNDRED DOLLARS ($142,500) J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 92 - 3121 Commodore plain 200 Coconut Omer, Florida 23133 Tel: 170118M•008D Fast (7841111241i70 LATE CnUeaP/aalalkmR tan a CODE HOURS 10/26r2aa0 FI0nda Stan Law and USPAP Rsvi.w for Roar alma Appraisers !� ACE968136522 7.0 922/2000 Partial Innrsat VsIui5on • Undivided ACE1437484566 7.0 114003 R.W.ssian Analysis bi Appraisal PtscX.: Cancapts and Applkabons ACE950643868 7.0 2/202000 Federal Appraisal R.quiwnsms ACEN2123876501 3.0 10/18.18n999 Cows. 330Apartment ApP,aiaat: Conapu and ApplcWons ACE5266 18.0 10/2/1999 Altackmg arld 0110nd eg an Appraisal ACE2150 3.5 611311099 Partial Intrust Valuation • Divided ACE70a3 7,0 7/24/1999 The Good, the Bad and tie Appraisal board' ACE2174 3.0 511/1999 An kuide view of adios and standards ACE2201 3.0 6/14/1998 7 Hay USPAP YAW Law log Appraisers ACEt261 7.0 7/16/1991 The lmpael o1 CannntinaIao an Reel Esnlr Vetter ACE2143 3.0 6/12-111090 Standards of Professional Fmk,. Part C ACE1980 16.0 5/2/11198 Loss Prwsnlion for Appraisers 14E2070 3.0 4f3/1998 Small Notal/Mo1el Valuation ACE2084 7.0 2120/1906 Appraisal Ofrka Management ACE2044 7.0 1/3111998 Non-mnfa n4 g Uses ACE2048 1.0 0/611997 Appraisal of Transferable D.vatopnulnl Rights ACE1985 7.0 7/811097 MAW A Far Landing Coors. 564 7.0 11/1511996 Appraisal of N rsing Home Facilities ACE1876 7.0 7/13/1996 The'96 Dan E■tlwparRowptable tar Inane Propeniss ACE1825 3.0 742/1996 Internal and the AWI IW ACE1750 3.0 0/10/1095 The Appuiaar as Expert V4lbess ACE IS31 7.0 2/4/1905 Real Esteta Evaluations and Ma Appraisal Industry ACE1612 3,0 10114/1994 Seven Hour USPAP 'Cora• Law For Appraisers ACE1261 za 6/5/1994 Lintitsd Appraisals and Reporting Options ACE1557 7.0 7/13.16/1994 Standards of Professional Pracclic., Paris A and B 410 & 420 27.0 6/11/1994 VsNkalion of Markel Day ACE1532 3.0 4/101994 Power Line Easamenta and EMF Seminar ACE1405 3.0 2/421/904 Amsriuns with Dlaabili9es AU CADA) &.minor ACE1482 4.0 0/11/1993 Hotel Valuatlan ACEIO65 3.0 4/17/1993 1Ahy Ina Cap Rata Is Always 10' ACE1283 3.0 9/28/1992 Education: Th. New Generation ACE1203 1.0 91/17•181992 Hoi.YMalal Markel Study, Valuation a investment ACE 1258 14.0 2/1/1902 Pricks/ Approaches to Appraising Traumlad Propeni.s ACE292 3.0 8M611991 OwrWew of Record Changes to Standards ACE89t 1.0 9/11I1990 Subdivision Analysis ACE9110 za 6/24.3p11990 Report WON and VakaSon Analysis EXAM2.2 18.0 2/24-3/31 1990 Casa Swan in Real Estste Valuation EXAM2.1 19.0 9/23-1114 1989 Capinlitation Tillery and TW nidess, Part 0 EXAMIB•B 39.0 5/7.11/ 1909 Standards of professions! Practice SPP 24.5 2/4.1/1A 1989 Capina:ation TMory and Techniques, Pan A EX*M18•A 39.0 9/17•10r22 106E Real EOM Appraisal PAncipks EXAMIA• 1 31.5 9/10.10115 1988 Back Valuation Procedures EXAMIA•2 CL A6 courses/seminars sponsored and given by the A TOTAL 400.0 Ppraiaal Imtidule. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 98 - JOZEF ALHALE, MAI 3121 Commodore Plaza, Suite 200 Miami, Florida 33133 QUALIFICATIONS Experience: Thirteen years in the field of real estate appraisal, consultation, economic research and market analysis. Membership: Appraisal Institute, MAI Miami Society of Commercial Realtors Professional Experience: J.B. Alhale & Associates, Inc., Miami, Florida President, May 1994 to present Dixon and Friedman, Inc., Miami, Florida Senior Appraiser, October 1991 - May 1994 R.G. Davis & Associates, Inc., Miami, Florida Fee Appraiser, January 1991 - October 1991 Izenberg Appraisal Associates, Inc., Parsippany, New Jersey Staff Appraiser, July 1988 - December 1990 Academic Education: Master of Science, Computer Science Rensselear Polytechnic Institute, Troy, New York Licensed: Bachelor of Arts, Cum Laude, Computer Science New York University, New York, New York State Certified General Real Estate Appraiser - State of Florida Certification Number RZ 0001557 Real Estate Salesman - State of Florida Assignments: Appraisals - Vacant land, industrial facilities, shopping centers, office buildings, rental and condominium apartment buildings, hotel and motel facilities, adult congregate living facilities and other special-purpose properties. Consulting - Economic research, market analysis and feasibility analysis pertaining to commercial and residential properties.. J.B. ALHALE & ASSOCIATES, INC. Real Estate Appraisers and Consultants 3121 Commodore Plaza, Suite 200 • Coconut Grove, Florida 33133 - 99 -